Preliminary Results

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

PRELIMINARY ANNOUNCEMENT

Devro plc ("Devro" or the "group"), the world's leading manufacturer of collagen products for the food industry, is pleased to announce its results for the year ended 31 December 2010.

Commenting on the results, Steve Hannam, Chairman, said, "Once again I am pleased to report on a year of progress in the business. In a period when the emphasis began to switch from recovery to growth, operating profit before exceptional items increased 39.4% compared to 2009. Strong cash generation has enabled a further reduction in net debt to £12.2 million even after investing £26.9 million in capital expenditure during the year. As a result of this continuing strong financial performance, the Board is recommending a final dividend of 5.0 pence, bringing the full year dividend to 7.0 pence per share, a 40% increase."

On the outlook for 2011, Peter Page, Chief Executive, said "We expect to see sales volumes increase further as the capacity from recent investments comes on stream and new products displace gut. We will continue to seek margin improvements as the benefits of manufacturing efficiencies come through, and we are planning significant new investments to provide capacity for further growth in 2012 and 2013. I am confident that our management teams around the world will maintain the excellent progress of the past three years."

Enquiries:

There will be a presentation today at 11.00am for investment analysts. This will be held at the offices of Buchanan Communications, 45 Moorfields, London, EC2Y 9AE. A live audio feed will be available to those unable to attend this meeting in person. To connect to the web cast facility, please go to http://mediaserve.buchanan.uk.com/2010/devro210211/registration.asp 

approximately 10 minutes (10.50am) before the start of the briefing. The presentation will also be available on the group's website.

Devro plc

Chairman's Statement 2010

Once again I am pleased to report on a year of progress in the business. In a period when the emphasis began to switch from recovery to growth, operating profit before exceptional items increased 39.4% compared to 2009. Strong cash generation has enabled a further reduction in net debt to £12.2 million even after investing £26.9 million in capital expenditure during the year. As a result of this continuing strong financial performance, the Board is recommending a final dividend of 5.0 pence, bringing the full year dividend to 7.0 pence per share, a 40% increase.

Financial highlights

Reported revenue for 2010 was £237.0 million (2009: £220.4 million), an increase of 7.5%. On a constant currency basis, revenue would have increased by 5.5% to £232.5 million.

Operating profit before exceptional items increased by 39.4% to £38.2 million (2009: £27.4 million). The operating margin increased from 12.4% to 16.1 %, reflecting higher prices and a more efficient manufacturing cost base. Adverse weather in December 2010 caused problems in our UK, US and Australian plants, reducing operating profit by approximately £0.6 million through lower sales, higher costs and lost production.

Movements in foreign exchange had a net beneficial impact of £1.9 million on operating profit. Of this, £1.2 million was the translation impact of a stronger Australian dollar.

Profit before tax and exceptional items rose 44.4% to £36.3 million (2009: £25.1 million). Pre-tax profit including exceptional items was £55.2 million in 2010 against £26.9 million in 2009.

During 2010, after consultation with our employees and pensioners, certain changes were agreed to the UK defined benefit pension scheme. These changes resulted in a reduction in the total liabilities of the scheme, giving rise to a credit of £18.9 million, which has been treated as an exceptional item. This reduction in liabilities meant that the year end deficit for the group schemes was reduced to £13.4 million (2009: £31.8 million) and helps secure the future benefit for pension scheme members.

Basic earnings per share before exceptional items for 2010 was 17.4p, up 48.7% compared with 11.7p in 2009.

Net interest cost fell during the year to £0.7 million (2009: £0.8 million), reflecting lower average debt during 2010.

Net finance expense on pension assets and liabilities amounted to £1.2 million compared with £1.4 million in 2009.

Net debt reduced to £12.2 million (2009: £15.6 million). This reduction in net debt reflects the continued improvement in operating performance and return on assets, and was achieved after a significantly increased spend on fixed assets of £26.9 million (2009: £19.5 million).

Business

During the year the group was able to build on the solid progress made over the previous years, which had been very much focused on recovery. New products have been launched and there has been investment in new capacity, while we continue to improve throughput and yields. There remains an emphasis on the pricing of products and we continue the trend to higher margin sales.

Against a background of more stable raw material availability and energy pricing, all the operating sites performed well, with a significant improvement in the US. Our Jilemnice plant in the Czech Republic also benefited from a full year of upgraded, more efficient lines, which replaced our lines in Korenov.

The two key drivers for our business remain the growth of meat consumption in emerging markets, and the conversion of sausage casings from gut to collagen in both established and developing markets. These combined gave an estimated growth in the global (excluding China) edible collagen market of approximately 4% in 2010. We experienced sales growth in most of our markets, with the exception of China, where we took a conscious decision to reduce sales to satisfy strong demand elsewhere. Excluding China, our sales volumes were up 11% compared to 2009.

Demand for collagen casings is growing rapidly in China, and we are looking carefully at strategic ways to approach that market. To bring focus to this task, one of our most experienced directors is relocating to Hong Kong to dedicate time and exploit opportunities in China and South East Asia.

The demand for our product is such that, of the capital expenditure in the year of £26.9m, £14 million related to in increased capacity. New lines have been brought on stream in the Czech Republic and Australia, and existing lines in Scotland are being upgraded. To cope with demand, it is expected that capital expenditure will increase to approximately £45 million in 2011, with further investment across all our manufacturing sites. The full benefit of this investment is expected to be seen in 2012 and 2013. Many of the projects involve upgrading or replacing existing older lines, an approach which not only increases capacity but enhances return on capital.

The trend to replace gut casings with collagen has been helped by the launch of our Select range of products. These have been specifically developed to replicate the characteristics of gut whilst providing efficiencies for the sausage producers. Different products in the range are now being produced on existing equipment in Scotland and the Czech Republic. A good level of gut conversion has continued to take place in Latin America, Japan and Russia, whilst Select has achieved satisfactory sales in Europe.

Safety

It is disappointing that, given the emphasis on safety, the number of Lost Working Day Injuries increased to 13 in 2010 (2009: 7), though this is the second best performance of the last 10 years. The total number of injuries requiring medical treatment was the same as in the previous year.

Monitored by the Board Health and Safety Committee, safety has continued to have a high profile across the group. A range of training programmes are in place and a number of specific actions have been taken to improve working practices and conditions. Both internal and external audits have been used to identify potential issues and improve our approach to health and safety. We continue to work towards our target of "Zero safety incidents".

Employees

A further successful year is due in great part to the commitment shown by Devro employees. The improved performance in both operations and the markets in which we sell reflects this commitment and the Board would like to thank all the members of the Devro team for their efforts in 2010. As mentioned last year, the business is becoming more global and there is increasing need for a unified approach to the market. In the last year there has been increased interaction between our locations to ensure that we learn from each other. This has included the progressing of our new ERP system, the development of best manufacturing techniques, health and safety, marketing approaches, new developments and increasingly the transfer of technology across the group. These initiatives will become more common as we strive to ensure that Devro is prepared for continued success on the world stage.

Dividend

The Board is proposing a final dividend of 5.0 pence per share (2009: 3.575 pence), bringing the total for the year to 7.0 pence per share (2009: 5.0 pence). The dividend will be paid on 6 May 2011 to those shareholders on the register on 1 April 2011. Last year was the first increase in dividend payment in four years, and the recommended dividend this year reflects the improvements in performance and financial strength of the group. The Board retains its policy of reviewing the amount distributed annually with the intent of moving dividends in line with underlying earnings, whilst taking into account the future prospects and cash requirements of the business.

Board changes

In December 2010 Peter Williams announced he would be retiring from the Board in early 2011. Peter has been Finance Director since joining Devro in May 2008 and has contributed to the business during a period of significant improvement in financial strength and performance. We all wish him a long and happy retirement.

On 17 January 2011 Simon Webb joined the Board as Finance Director Designate. Following a transition period to allow thorough familiarisation and a professional hand-over of responsibilities, he will become Group Finance Director on 7 April 2011 when Peter retires. Simon, a chartered accountant, brings with him considerable experience of managing a finance function within international businesses. His senior finance positions have included Threadneedle, BAT plc, Paxar plc, Enodis plc, and most recently De La Rue plc where he was Group Finance Director.

Outlook

Operating within a growing market with new products and increasing capacity, Devro can look forward to further growth and efficiency improvements in all its operations. Longer term, the strength of our balance sheet gives us confidence that we will be able to take advantage of growth opportunities as they arise.

Steve Hannam

Chairman

Business Review

2010 was the third year in succession that Devro has increased operating profits while investing more in capital expenditure and reducing debt. Of particular note was the better management of sales mix and further improvements in manufacturing efficiency across the group.

Strategy

Devro's aim is to become an increasingly successful and profitable supplier of collagen casings and associated products to the global food industry.

Our strategic objectives are:

·; to increase revenue in established markets by displacing the use of gut through the introduction of new products, and by continuing to develop the technical support we give to our customers;

·; to increase revenue in emerging markets by extending our sales and distribution network to have more direct contact with leading food manufacturers; and

·; to reduce unit costs by maximising the volume of output from our fixed assets and actively managing the primary costs of raw materials, labour and utilities.

Sales

Sales volumes in established markets continued to grow with an increased focus on key account management. In the US, edible collagen volumes increased 19% as a result of several customer-focused initiatives. These included the development of a carmine-free casing to meet new labelling regulations which came into effect in January 2011, modification of beefstick casings to gain business with a growing brand, and ongoing support for a major customer as they reorganised manufacturing of a high volume product.

Volumes in the UK increased marginally. At the start of the year there was a marked increase in total retail volumes of sausage in the UK, although this tailed off in the second half, particularly when compared to prior year. Devro sales revenues increased ahead of volumes as a result of continuing efforts to bring more value to customers, ranging from collaboration on new product development projects, to intensive support given to one major customer as they relocated all of their UK sausage manufacturing to a new site.

In Japan, volumes increased over 6% as existing customers continued to increase their use of collagen casing. Japanese manufacturers have very specific requirements and a gradual decline in the availability of high quality gut has resulted in more interest in the benefits of collagen. This trend is expected to continue.

Volumes in emerging markets also continued the strong growth of previous years. A 15% increase in Latin American volumes follows some significant conversions from gut to collagen in Mexico, and further sales growth in diverse markets ranging from Colombia to Venezuela.

East European sales increased 9% on prior year, partly as a result of the recovery from 2009's downturn and partly as more product became available from our Czech plant. A 47% volume increase in Russia reflected an increase in Devro's share of the market, gaining volume from a local manufacturer, and significant interest in Select and the advantages it gives over gut.

The South-East Asian markets, particularly South Korea, Taiwan, Thailand, the Philippines and Indonesia, all saw volume growth, 61% higher than 2009. This was due to gut conversions, competitive advantages and increasing production across the region.

In summary, volumes in markets excluding China increased 11% as the group continued to grow in higher margin markets. In 2010 that growth in higher margin sales resulted in the group tendering for, and supplying, lower volumes in China. Whilst it has benefited 2010's profits, the recent reduction in sales in China does not reflect the significant amount of business development work in 2010 which is progressing our strategic objective of growing volumes significantly in the longer term.

We closely monitor our success in converting gut users to collagen. Having recorded and analysed each new conversion achieved in 2010, we estimate that the volume gained is equivalent to 2% of Devro's total volumes on an annualised basis. This is in line with recent trends and it demonstrates success in continuing to expand the overall market for collagen.

Sales values also improved as we achieved price rises and moved sales from lower to higher value products and markets. This added £7.4 million to operating profit during 2010. We are acutely aware of the pressures faced by our customers, so we are constantly seeking ways to provide them with both technical support and product enhancements.

Distributed products are predominantly cellulose and fibrous casings sold on behalf of other casing manufacturers in a small number of markets. We are not seeking to grow this lower margin business and, as some contracts have reached conclusion dates, we have not sought to renew them.

Adverse weather in UK, US and Australia in December had a measurable impact on our customers and hence, temporarily, on our own sales.

Operations

2010 saw further progress in manufacturing, with improved yields, faster line speeds and newly-installed lines combining to give a 7% increase in saleable output. This increased output was used to rebuild inventories from very low levels at the end of 2009, providing some extra stock to cover for planned shutdowns in 2011, and to increase sales volumes by 2% in 2010.

Additional capacity installed in the Czech Republic and Australia during the past year gave approximately 3% more volume during 2010, and will add 6% in a full year. Along with line upgrades in Scotland, these investments contribute to reduced unit costs and lower carbon emissions per unit sold.

Consistency in hide raw material supply is critical to the business, and 2010 was better than 2009 in terms of quality and processing. Prices have been less volatile and were broadly in line with 2009. We continue to identify new raw material sources.

In 2010, two new products were brought to market. Select is a thinner-walled collagen casing aimed at the processed wiener sector, which is the biggest segment by volume in the global sausage market. Select has been under development since 2007, and it was introduced in May 2010 at the triennial IFFA Industry Trade Show in Frankfurt. Whilst it is expected that it will take up to three years to establish significant volumes of this innovative product, the reaction from customers has been very encouraging as they see the benefits of lower manufacturing costs. Repeated trials by a professional taste panel in Germany provide substantial evidence that consumers rate it as comparable to high-quality gut. Handlink is a casing manufactured in our Australian plant using only local hides, and is aimed at the significant retail butchers sector, which still has a strong consumer following in Australia.

2011 Outlook

We expect to see sales volumes increase further as the capacity from recent investments comes on stream and new products displace gut. We will continue to seek margin improvements as the benefits of manufacturing efficiencies come through, and we are planning significant new investments to provide capacity for further growth in 2012 and 2013.

The market for fresh sausages in China has expanded with extraordinary speed in the past three years. Devro has good connections with some of the major players in this key market and several activities are in hand to establish a much stronger presence for the future. In early 2011, the process of establishing a Wholly-Owned Foreign Enterprise in Beijing will be completed, allowing the company to conduct direct commercial transactions there. A senior director is relocating to Hong Kong, in order to lead the growth of our business in China and South East Asia. In view of the significant potential in China, Devro is pursuing several complementary routes to the market.

In Continental Europe, a fragmented organisation, the legacy of previous acquisitions and disposals, is being brought together as one operating business and legal entity, Devro s.r.o. With the recent recruitment of a Commercial Director and the commitment of some of our most experienced senior managers to the region, the focus will be on increasing the effectiveness of direct communication with large key accounts, and improving the quality of representation and support by local distributors.

With the additional capacity investments completed in 2010, and following the introduction of Select casings, Devro expects to continue the recent trend of growth in 2011. All indications suggest that demand will increase in emerging markets and significant opportunities for gut conversion exist in established markets.

Capital investment of £45 million is planned for 2011, which will increase capacity by 8% in both 2012 and 2013, improving efficiency, reducing unit costs, and limiting the consumption of fossil fuels. We plan to invest in additional capacity and to enhance manufacturing efficiencies in both 2012 and 2013. These investments will not require additional shareholder funds.

Peter Page

Chief Executive Officer

FINANCIAL REVIEW

Key performance indicators

Management uses a number of key financial indicators to assess the performance of the group. These are as follows:

·; Revenue growth

o Value growth - increase in sales achieved by the group relative to prior period

o Volume growth - increase in number of metres or kilos of product sold by the group relative to prior period

·; Operating margin - operating profit before exceptional items as a percentage of revenue

·; Return on capital employed (ROCE) - operating profit before exceptional items as a percentage of average capital employed. Capital employed is defined as fixed assets plus current assets less current liabilities, excluding all balances related to interest-bearing assets and liabilities, effective hedges related to interest-bearing liabilities, any deferred tax balances, and any pension assets or deficits.

·; Net debt/earnings before interest, tax, depreciation and amortisation (EBITDA) - measures the liquidity of the group

Revenue

Reported revenue for 2010 was £237.0 million (2009: £220.4 million), representing an increase of £16.6 million, or 7.5%, over 2009. Of this increase, £3.7 million related to volume, £8.3 million to sales price and mix, and £4.6 million to foreign currency movements.

Sales revenues by product group were as follows:

Increased sales volumes were made possible by enhanced productivity from existing facilities, which also allowed us to increase inventory levels at the year end. Sales volumes of edible collagen casings rose by 2.2%. Excluding China, volumes increased by 11.5%.

Distributed products are mainly cellulose and fibrous casings sold on behalf of other casing manufacturers. As previously noted, agreements relating to some distribution arrangements expired at the end of 2009, and we have not sought to renew them. This resulted in a reduction of 9.4% in volumes of distributed product compared to prior year.

Other products had similar volumes year on year apart from collagen film, which grew 21%. Overall, the volume impact on revenue amounted to a 1.7% increase.

Year on year revenue growth between 2007 and 2010 can be analysed as follows:

*On a continuing operations basis

Sales volumes increased overall, but there were significant movements between markets. Pricing and sales mix improved in 2010, reflecting underlying price increases and a change in mix to higher value customers and markets.

2010 revenue growth by geographical region compared to 2009 can be analysed as follows:

European sales increased in volume terms, and showed price growth coupled with a movement to higher-value products. Growth in the Americas was driven by strong sales in Latin America, and selling prices moved ahead, but the adverse impact of selling lower-value products meant that the overall price/mix benefit was limited. In Asia /Pacific, there was an overall reduction in volumes, but this was exclusively in China, with other countries in South East Asia showing strong growth.

Operating Profit

The movement between 2009 and 2010 operating profit before exceptional items can be analysed as follows:

Price/Mix

Overall, we achieved a profit improvement of £7.4 million from higher sales prices and a better sales mix. Of this, £3.2 million resulted from actual increases in sales prices and £4.2 million from changes to customer and product mix.

Volume

Profit impact of volume represents the gross margin earned on net additional sales between 2009 and 2010 by product group.

Manufacturing

Manufacturing operations, through consistency, productivity and efficiency, again made a substantial contribution to the improved profitability of the business, amounting to £4.2 million. The closure of an old factory in Korenov in the Czech Republic, halfway through 2009, resulted in approximately £3.0 million of cost savings for a full year, with a £1.4 million benefit in 2010 compared to 2009. In 2009, our US operation experienced changes in hide supply which led to a temporary reduction in efficiencies and yields. These issues were resolved during 2010, with significant improvements in manufacturing output from the US plant. There were further improvements in our other plants from increased line speeds and improved yields.

Foreign currency

Devro operates worldwide and with multiple currencies. Its major transactional exposures arise from sales in euro, US dollars and Japanese yen whereas the manufacturing costs are in Australian dollars, Czech koruna, US dollars and sterling. Translational exposures arise from the conversion of the results of overseas companies into sterling. Sales revenues in 2010 included a £4.6 million benefit from exchange. The translation into sterling of results denominated in other currencies and the impact of hedging contracts meant that, overall, the net impact of exchange rate movements on operating profit was a benefit of £1.9 million compared to 2009. Of this, approximately £1.4 million was due to translation, mainly resulting from a stronger Australian dollar.

Input costs

Due to more favourable supply contracts, energy costs showed a saving of £1.1 million compared to 2009. We expect these costs to be slightly higher in 2011 and similar to 2009 levels overall.

Hide supplies stabilised during 2010, and costs were broadly in line with 2009.

Underlying labour costs have risen during the year in line with inflation. Other operating costs have risen during the year, reflecting an investment in facilities and enhanced operational capacity, aimed at prompting future growth.

Impact on December results

The adverse weather conditions at the end of the year in the UK, US and Australia caused disruption to production and sales across these markets. These led to an overall loss of approximately £0.6 million, in lower sales, increased costs and lost production.

Operating margin

Operating margin increased to 16.1% for the year, compared to 12.4% for 2009. This was driven by improvements in sales prices, a shift of sales to higher margin products and customers, and improvements in manufacturing, partially offset by increased operating costs.

Capital investment

Capital expenditure in the year was £26.9 million. The major items of expenditure related to the installation of new high speed lines in our manufacturing facilities in the Czech Republic and Australia.

Environmental expenditure continued in 2010 with work on a co-generation plant in our factory in Bathurst, Australia.

In total, capital spend for 2011 is expected to be approximately £45 million.

Working capital

Gross inventory levels have risen by 11.5% to replenish low levels of stock held at the end of 2009 and in anticipation of planned shutdowns in 2011 to upgrade lines. Trade receivables increased because of the higher sales, but the number of days outstanding fell, reflecting our focus on cash management.

Financing

Key financial measures are as follows:

Management has a policy of distributing debt between the various currencies in which it operates; therefore the net debt figure may fluctuate based on exchange rate movements.

ROCE has improved as we continue to get more out of our existing asset base in terms of efficiency and production, and because new assets are more efficient than the ones they replace.

Interest cost

Net interest cost for the year was £0.7 million (2009: £0.8 million). This reduction reflected both a lower absolute level of net debt and lower interest rates than in 2009.

Net finance expense on pension assets and liabilities amounted to £1.2 million compared with expense of £1.4 million in 2009. This movement reflects the reduced reported deficit in the group pension schemes.

Tax

The group had an effective tax rate, before exceptional items, of 21.6% for 2010 (2009: 24.1%).

The group benefited from a lower tax rate in the Czech Republic in 2010, which included the impact of a tax incentive scheme.

The effective tax rate for 2011 is likely to be around 22%.

Earnings per share

Basic earnings per share before exceptional items for 2010 was 17.4p, up 48.7% (2009: 11.7p). This reflected the improved operating margin and the lower tax charge in the year. Basic earnings per share for 2010 was 25.8p, up 108.1% (2009: 12.4p).

Pensions

The group operates a number of defined benefit pension schemes around the world. All of these are closed to new participants, but the liabilities related to existing schemes are considerable.

As noted above, during 2010, after consultation with our employees and pensioners, certain changes were made to the UK pension scheme, which has been kept open to future accrual for existing members. These changes resulted in a reduction in liabilities of the scheme and an income statement credit of £18.9 million, which has been treated as an exceptional item in the accounts.

During the year, the value of the assets in the schemes rose along with worldwide equity markets. The value of liabilities, however, remained broadly unchanged, with the adverse effect of a fall in discount rates offset by the reduction in liabilities due to the changes made to the UK scheme. The net impact was a decrease in the IAS 19 deficit of the schemes, which at 31 December 2010 amounted to £13.4 million (2009: £31.8 million). Further additional contributions will be made to the schemes during 2011 with the aim of continuing to reduce this deficit.

Principal risks and uncertainties

There are risks and uncertainties inherent in the group's operations which could have a significant impact on our business, results and financial position. The group's risk management processes are designed to identify, assess, monitor, manage and mitigate the risks involved in our operations. The more significant risks to which the group is exposed are:

·; Disruption to supply and increase in price of key raw materials

·; Foreign exchange rate movements

·; Customer credit risks

·; Increased funding of pension schemes

·; The impact of changes in regulations affecting food production

·; Food industry health concerns

·; Increases in energy costs

·; Loss of market share/profit margins due to increased competitive pressures

·; Development of non-casing technologies

These are generally consistent with those detailed in the 2009 Annual Report.

Going concern

Devro has committed borrowing facilities of £51.0 million that fall due for renewal in January 2012. At 31 December 2010, the group was operating comfortably within the covenants relating to these facilities.

We believe that Devro is well financed and has sufficient liquidity to fund the capital expenditure required to continue to grow the business. The group has held discussions with its bankers about its future borrowing needs and no matters have been drawn to our attention to suggest that renewal may not be forthcoming on acceptable terms.

After making enquiries, and considering the question carefully, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Dividend

With the improvement in performance, the Board is proposing an increase of 40% in the dividend for the year, making a final dividend of 5.0 pence per share (2009: 3.575 pence), bringing the total for the year to 7.0 pence per share (2009: 5.0 pence). This will be payable on 6 May 2011 to shareholders on the register as at 1 April 2011. Based on the proposal for the full year, dividend cover excluding exceptional items will be 2.5 times.

Peter Williams

Finance Director

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 STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2010

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2010

NOTES TO THE PRELIMINARY ANNOUNCEMENT OF THE FINAL RESULTS

for the year ended 31 December 2010

 (1) Analysis of operating profit before exceptional items

 (2) Exceptional items

Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence to enable a full understanding of the group's financial performance.

The following exceptional items are included in the operating profit on continuing operations of £57,072,000

(2009: £29,199,000):

(i) During 2010, after consultation with our employees and pensioners, certain changes were made to the UK

defined benefit pension scheme, which resulted in a reduction of £18,851,000 in scheme liabilities.

(ii) As disclosed in the statutory accounts for the year ended 31 December 2008, the group's post-retirement health

care plan in the United States was closed on 30 January 2009. The elimination of the liability under the plan

resulted in an exceptional credit of £1,788,000 during the year ended 31 December 2009.

(3) Analysis of net debt

(4) Accounting year

For practical reasons, the company prepares its financial statements based on a 52 or 53 week period. The financial statements for the 2010 financial year reflect the 52 week period ended 2 January 2011. The financial statements for the statements for the 2009 financial year reflect the 53 week period ended 3 January 2010.

(5) Statutory accounts

While the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards ("IFRSs"), this announcement does not itself contain sufficient information to comply with IFRSs. The company expects to publish full financial statements that comply with IFRSs in March 2010.

The financial information set out in this announcement is unaudited and does not constitute the company's statutory financial statements for the years ended 31 December 2010 or 2009 for the purposes of section 435 of the Companies Act 2006. The financial information for the year ended 31 December 2009 is derived from the statutory financial statements for that year which have been delivered to the Registrar of Companies. The auditors reported on those financial statements; their report was unqualified and did not contain a statement under sections 237 (2) or (3) Companies Act 1985. The statutory financial statements for the year ended 31 December 2010 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's Annual General Meeting.