Preliminary Results

7 March 2011

BRITISH POLYTHENE INDUSTRIES PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

Sound results despite significant increase in raw material prices

Highlights

·; Sales increased 12.5% to £478m (2009: £425m)

·; Operating profit before net restructuring of £17.9 million (2009: £19.0m) impacted by substantial increase in raw material costs

·; Diluted earnings per share, before net restructuring, of 38.31p (2009: 38.60p). Diluted earnings per share of 51.07p (2009: 30.36p)

·; Profit before tax up to £16.7m (2009: 11.8m)

·; Net borrowings reduced by £6.6m to £45.6m

·; Final dividend increased to 7.85p (2009: 7.5p), making a total dividend for the year of 11.5p (2009: 11.0p)

·; Good start to the year although 2011 will not be easy

Commenting on the results Cameron McLatchie, Chairman of BPI, said:

"2010 showed evidence of further improvement in the underlying performance of our business.

Despite increases in raw material costs of some £45 million, operating profits were only £1.1 million less than 2009. The Board is encouraged by this very satisfactory performance in difficult circumstances and are recommending an increase in the dividend for the year.

We are confident that the actions that have been taken over the last few years have put our business in a better position to weather the current economic climate and also to be able to take advantage of any upturn in the economy. 2011 will not be easy, but we have made a good start."

Enquiries

Chairman's Statement

For the year ended 31 December 2010

INTRODUCTION

2010 showed evidence of further improvement in the underlying performance of our business. The Group benefitted from previously reported actions to align capacity with demand and significantly reduced costs in the UK business. However, this progress was impacted by escalating raw material costs during the year.

Despite increases in raw material costs of some £45 million, operating profits were only £1.1 million less than 2009. The Board is encouraged by this very satisfactory performance in difficult circumstances and are recommending an increase in the dividend for the year.

RESULTS

Total volumes for the year were 280,000 tonnes (2009: 275,000) reflecting a slight recovery in demand from the construction and industrial sectors and robust sales of agricultural stretch-film.

On sales of £478 million (2009: £425 million), operating profit, before net restructuring, decreased to £17.9 million (2009: £19.0 million).

Operating profits were impacted by a substantial increase in raw material costs, due to the inevitable time lag in passing these on to our customers. All other costs were tightly controlled and we saw improved efficiencies in many operations.

Net restructuring reflects costs of £1.0 million for the closure of the Brampton site and certain other personnel changes, offset by a £3.8 million gain on sales of the Stockton and Brampton sites. The property gain enabled us to show a positive contribution from restructuring in 2010 of £2.8 million (2009: negative £3.1 million). We previously indicated that restructuring costs for 2010 would be offset by this gain, although the 2010 gain on the Stockton site should be seen in light of significant restructuring costs incurred in closing that site in 2008 and 2009.

Borrowing costs reduced from £2.7 million to £2.1 million, reflecting lower average borrowings during the year.

This reduction in borrowing costs was offset by an increase in the charge for pension financing from £1.4 million to £1.9 million, resulting in a slightly reduced net financing cost of £4.0 million (2009: £4.1million).

The profit before tax was £16.7 million (2009: £11.8 million). Diluted earnings per share were 51.07p (2009: 30.36p). Diluted earnings per share, before net restructuring, were 38.31p (2009: 38.60p).

DIVIDEND

After the increase in the interim dividend to 3.65p per share (2009: 3.5p), the Board is recommending an increase in the final dividend to 7.85p per share (2009: 7.5p), making a total for the year of 11.5p per share (2009: 11.0p).

As we indicated in last year's accounts, the Board intends to return to the payment calendar which prevailed before 2009, with the final dividend payable in July 2011.

This dividend will be payable to shareholders on the register at the close of business on 18 March 2011.

CASH FLOW AND BORROWINGS

The Group generated similar operating cash flow to 2009, but this inflow was impacted by a net outflow of nearly £5 million in working capital, as a result of the increases in raw material costs. This is a reversal of nearly £20 million from the working capital flow in 2009, a considerable amount of which is attributable to the raw material price fluctuations.

Despite this increase in working capital, borrowings reduced to £45.6 million (2009: £52.2 million). The reduction is almost entirely due to the proceeds of the sale of vacated sites at Stockton and Brampton, which together generated £6.3 million.

Gross capital expenditure for 2010 was £15.1 million (2009: £13.0 million), and we currently envisage that expenditure for 2011 will be slightly above the 2010 spend.

Major items of expenditure will include further investments in recycling equipment, co-extrusion lines for stretch and packaging films and flexographic printing presses.

In January 2011, we sold the vacant site at Buckhurst Hill in Essex for a cash consideration of £2.5 million, generating a gain of £1.95 million. This sum will be used to further reduce our borrowings. We have now sold all vacant properties.

We have agreed new banking facilities of £70 million to replace our £57.5 million revolving credit facilities which were due to expire in November 2011 and certain short term facilities. Of the new facilities £15 million will expire in 2014 and £55 million will expire early in 2015. Our total facilities including asset finance and overdrafts remain in excess of £100 million.

The terms on which we have agreed these new facilities will, on a like for like basis at current interest rates, see an increase of some £0.3 million in interest costs on our borrowings in 2011.

GROUP PENSION SCHEME

The IAS 19 deficit in the UK pension scheme decreased to £55 million (2009: £57 million).

Whilst the scheme investments performed better than the actuarial assumptions and the expected long term inflation rate reduced, there was a further reduction in the discount rate applied to the liabilities of the scheme.

Due to the Government's announcement that future statutory pension increases will be based on the consumer prices index, the scheme rules require that this basis is now applied to members' deferred benefits. This change has reduced the scheme liabilities by £9.0 million. Pensions in payment are currently expected to remain adjusted by the retail prices index.

We have reviewed the longevity assumptions to reflect increasing life expectancy and this has increased the scheme liabilities by £5.0 million.

Following a period of consultation with the members, the scheme closed to future service accrual from 30 September 2010.

BOARD CHANGES

Eric Hagman will retire as a Non-Executive Director at our AGM in May. Eric has been a Non-Executive Director since 2002 and has chaired the Audit Committee since 1 March 2006. The Board appreciates his valued input during this period and in particular his efforts during the many changes in pension and accounting reporting standards over the last few years.

We are pleased to announce the appointment today of Ron Marsh as a Non-Executive Director of the Group. Ron is currently Chief Executive of RPC Group, Europe's leading supplier of rigid plastic packaging products. The Group welcomes his experience in this sector and his knowledge of managing a European wide business.

REGULATORY ISSUES

In May 2010, we announced that we had been visited by officials from the European Commission ("EC") and the Office of Fair Trading ("OFT"), as part of enquiries which they are conducting into the agricultural films market. We have co-operated with the requests for information from the OFT since their inspection. No requests have been received from the EC. While these enquiries are ongoing, it is not possible at this stage to ascertain whether or not any further action will be taken by these regulatory

bodies as a result of these enquiries or the likely timetable for resolving these matters.  We have extensive guidelines and controls in place designed to ensure compliance with competition laws across our operations.

During 2010, we incurred some £0.5 million in legal costs in relation to these investigations.

GROUP DEVELOPMENT

2010 was the year when our capacity in the UK became more closely aligned with demand, resulting in a significant de-risking of our business.

After a lengthy run-down period, the Stockton site was closed and sold. Capacity had been moved, over an 18 month period, to other UK sites, principally Ardeer and Greenock. This involved the construction of two new extrusion halls at Ardeer and a significant effort by the management and workforce at both of these sites. After some initial teething issues, the product from both plants is now of similar or better quality than previously offered, and we have successfully retained the vast majority of the customers.

In October, a few months later than anticipated, we began commissioning the new 5-layer wide-film line at Ardeer and have produced excellent product, although we have had a number of technical issues resulting in operational outages during the first few months. We expect this line to make a positive contribution in 2011.

In April, we closed the film extrusion plant at Brampton where the low roof height and out-dated equipment was making it difficult to remain competitive. Capacity was increased at the Bromborough site and this move has proved successful. We are currently in the process of completing a refurbishment of existing extrusion equipment at Bromborough, to improve both quality and output.

In January 2011, we commenced production of co-extruded stretch-film for agricultural applications at our AT Films plant in Canada. Subject to satisfactory performance, it is our intention to increase this capacity in the next few years.

We have successfully field-trialled machine-direction-orientated (MDO) film developed at our plant in Roeselare in Belgium and are investing further in MDO equipment at that site. We have also installed a conversion machine to make form-fill-and-seal (FFS) tubing at our plant in Hardenberg where we have a contract from a major customer to supply MDO style FFS for packing plastic granules. MDO films allow the customer to further down-gauge (use thinner film) on certain specialised packaging equipment.

Any minor restructuring costs for 2011 should be more than offset by the gain on sale of the Essex site.

RAW MATERIAL COSTS

Last year, at this time, we reported that polymer prices had increased, but not to the level we experienced in the summer of 2008; a level that we thought was unsustainable.

Events have proved us wrong, and we are now back at these levels once again; but only in Europe, where polyethylene polymer, our basic raw material, is mainly manufactured from ethylene derived from naptha and, in turn, from oil.

In the Middle East and North America, much of this polymer is manufactured from ethane gas, a much cheaper feedstock, resulting in lower prices in these markets.

Tariff barriers, high shipping costs and transit time risk all inhibit global trade in these polymers and there is no effective hedge available in the financial markets. Margins in polymer, from well-head to granule, have never been so high; although demand is certainly not robust in Europe. Despite that, there is no sign of prices coming down and we have seen increases from suppliers both in January and February 2011.

These increased prices will slow further reduction in our borrowings in the short term, as working capital will increase.

We have decided to accelerate our planned investment in recycling equipment for both in-house and post-use polythene films. At current polymer prices investment in recycling should deliver very good returns and act as a hedge against continuing price increases.

What must be clear to any long-term follower of our business is that polymer prices will always be an issue and at times a bigger issue than others. However, we have consistently demonstrated that we can trade through massive swings in polymer pricing and still deliver profits, albeit with squeezed margins as prices increase.

PROSPECTS AND CURRENT TRADING

As previously stated, our UK business has been significantly de-risked by the actions taken over the last few years. Capacity is much better aligned with demand and all of our plants are relatively busy.

We are entering the main agricultural film season and currently anticipate that it will match or exceed performance for 2010, but the final result will depend on the growing conditions over the next few months.

The construction sector, which was showing some modest signs of recovery last autumn, has had a difficult winter and we will not get a clearer picture of demand until winter is completely behind us.

Margins are currently under considerable pressure due to increased raw material costs, but these increases are being passed on to customers as quickly as possible.

We have commenced the year well, with better than anticipated sales of agricultural stretch-film, as customers become aware of rising raw material prices. The first few months will show a better outcome than last year.

Many of our smaller competitors do not have access to finance to expand or even sustain their operations because of the current need for increased working capital. Credit has become a very important issue for many of our suppliers as, for the most part, our industry is badly under-capitalised.

Your Board is confident that the actions that have been taken over the last few years have put our business in a better position to weather the current economic climate and also to be able to take advantage of any upturn in the economy. 2011 will not be easy, but we have made a good start.

Cameron McLatchie

Chairman

7 March 2010

Consolidated income statement

For the year ended 31 December 2010

Consolidated statement of comprehensive income

For the year ended 31 December 2010

Consolidated balance sheet

At 31 December 2010

Consolidated cash flow statement

For the year ended 31 December 2010

Consolidated statement of changes in equity

For the year ended 31 December 2010

¹ As at 31 December 2010 the holding company retained earnings amounted to £34.6 million (2009: £17.8 million) and are not affected by movements in retirement benefit obligations.

Notes to the consolidated financial statements

For the year ended 31 December 2010

1. Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("adopted IFRSs").

2. Segment reporting

The Group has three reportable segments: UK & Ireland, Mainland Europe and North America. The segments were established by reviewing the management information regularly presented to the entity's chief operating decision maker (CODM), which has been identified as the Board of Directors. The information presented to the Board is consistent with the three reportable segments identified above, with the UK & Ireland business further segregated by business activity. As all of the UK & Ireland segments meet the aggregation criteria set out in IFRS 8, they have been aggregated to form one reportable segment as permitted by the standard.

UK & Ireland includes all of the UK manufacturing and merchanting activities along with the Irish sales operation which distributes predominately UK manufactured products. It also includes the manufacturing operation in China from which most of the output is exported for sale by the Group in the UK. Mainland Europe comprises the manufacturing and merchanting activities located in Belgium, the Netherlands and France. North America comprises the manufacturing business in Canada with sales throughout North America.

Segment profit

An analysis of the Group's revenue and results by operating segment for the periods is presented below. The measure of segment profit provided to the CODM is profit from operations.

Segment assets

The Group's assets are analysed by operating segment as follows

* The measure of non-current asset used for segmental reporting comprises goodwill, other intangible assets, investments and property, plant and equipment. It excludes deferred tax and retirement benefit assets.

3. Dividends

The proposed final dividend of 7.85p per share will be paid on 21 July 2011 to shareholders on the register at close of business on 18 March 2011.It was approved by the Board on 7th March 2011 and has not been included as a liability as at 31 December 2010.

4. Earnings per ordinary share

5. Retirement and employee benefit obligations

6. Contingent Liabilities

In April 2010, the Group was visited by officials from the European Commission ("EC") and Office of Fair Trading ("OFT") carrying out separate unannounced inspections into the agricultural films market. The Commission has stated that it has reason to believe that the companies concerned in these inspections may have violated EU antitrust rules that prohibit cartels and restrictive business practices and /or abuse of a dominant market position.

BPI has cooperated with the requests for further information from the OFT received since their inspection under the Enterprise Act 2002. No requests for information have been received from the EC.

There is no strict deadline within which either the EC or OFT must complete their enquires into possible anti competitive conduct. While these enquiries are ongoing, it is not possible at this stage to ascertain whether or not any further action will be taken by either the EC or the OFT as a result of these enquiries or the likely timetable for resolving these matters. As the Directors cannot predict with any degree of certainty the outcome of the above matters, it is not possible to assess accurately the likelihood of any significant financial cost to the Group or quantum of any cost.

7. Statutory accounts

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2010 or 2009 but is derived from the 2010 accounts. Statutory accounts for 2009 have been delivered to the registrar of companies, and those for 2010 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified and (ii) did not contain statements under section 498(2) or (3) of the Companies Act 2006.

8. Annual General Meeting

The Annual General Meeting will be held on Thursday, 12 May 2010 at 12 noon at the Company's Head Office, 96 Port Glasgow Road, Greenock, PA15 2UL.

9. Results

The results will not be advertised in any newspapers.