1.Good morning. Welcome to our first interim results presentation as the Aga Foodservice Group. After the rapid changes at the start of the year I am pleased to report that our core operations have continued to perform well and that the Group overall has adjusted rapidly to the changed requirements placed upon it. 
2. This morning I shall cover progress in the year to date. Shaun will provide a commentary on our financial position and on the shareholding structure post the tender offer; Stephen will discuss our new energetic marketing and sales initiatives, and I shall then consider our prospects and our strategic objectives. 
3. The primary events obviously this year were the Pipe Systems disposal to Etex completed in March - a transaction which proved well-timed given subsequent weak industrial spending in North America and increasingly in Europe - and the £335 million tender offer. The new start required a changed corporate structure to reflect the scale and nature of the business. This has been successfully achieved. The corporate based team is now under 30 down from nearly 50 one year ago. Corporately controlled costs have reduced by over an annualised £2.5 million in that period. At the same time we made the acquisition of Fired Earth and have given considerable attention to how best to use the resources now at the disposal of the Group. 
4. Underlying all else is the need for a strong trading performance. That was achieved in the first half. Consumer Products turnover was £56 million, up 6% year on year with operating profits up 24% at £4.1 million. With Foodservice Products turnover was up 21 per cent at £50.3 million with operating profits up to £5.2 million from £4.3 million. Here much of the profit improvement is attributable to the first contribution from Mono. 
5. Looking at that performance in more detail. Aga achieved record first half profits. Aga volumes at 3,600 were 5 per cent up on a strong first half to last year. 20% of sales were exports. A 3% price increase was introduced at the end of March. With the mix shifting more to 4-oven Aga`s from 2-oven, and with more modules and companions being sold the average unit retail sale price was up by more than the general price increase. With Rayburn a quieter start gave way to a good second quarter leaving volumes at 2,100 little changed year on year. Aga is putting greater focus on retailing and this was seen notably in higher cookware sales - up a third, and taken with Cookcraft, acquired in February, we now have a £4 million turnover cookware business.
Agalinks provides a marketing and information base which will prove increasingly relevant and dynamic to our growing consumer operations. Agalinks adjusted quickly to the harsh environment for online operations. £1.7 million has been invested this year of which nearly £1 million was in technology and hardware. This is shown as an exceptional item in the accounts. Break-even is targeted for 2002 - which given a support cost of under £0.7 million, is plausible even though third party sponsorship and advertising sources are at low ebbs. Agalinks has over 32,000 registered users and visitor numbers are steadily rising.
Moving to Leisure : Leisure continues to perform well, but it is in a difficult highly competitive market dominated by the multiple retailers. This is well seen in the decrease in the price of the original Rangemaster from £1,599 in 1998 to around £1,099 when it was replaced by a new generation cooker in July this year. In the last three years £3 million has been taken out of the cost base at the Leamington Spa factory and with 200 fewer employees production levels are at a record high. It is by reducing the cost base and along with an energetic approach to new products, the business still was able to improve slightly both turnover and operating profits.
6. Looking now at the commercial operations. Williams, our £45 million 1998 refrigeration acquisition, performed well in the first half in the UK with major contract wins with Sainsbury and Compass. Overall it was flat as overseas sales were down primarily because it obtained no single major order, such as that last year for the Sydney Olympic Village. Falcon, the prime cooking operation, started relatively slowly in the UK and was still slightly down at the half year with hotels and restaurants unsurprisingly quiet. With the public sector in particular now having additional resources, the order book position has been improving.
Mono - acquired in July 2000 for £11 million - performed extremely well and will exceed our 15% return on investment criteria this year. With supermarkets looking to in-store bakeries to pull in customers, as the clear UK market leader, Mono has excellent prospects reflected in major new contract wins this year with Safeway, Marks and Spencer and Tesco.
7. At Victory the weak US market did not provide a good backcloth. However, this £20 million annual turnover business has been steadily improving since acquisition and is restoring its market position. AFE Online has undergone a repositioning to focus more on major national accounts and the benefits will accrue as the year progresses. The potential offered by B2B trading remains. We are gaining growing interest in what is now the third generation of our site.
Serviceline is a substantial service back up organisation with over 140 engineers. While not hugely profitable in its own right it generates leads and enables us to provide a package in support of our manufacturing based operations.
A sound start at a trading level. Shaun will look at the remainder of the P & L and balance sheet.
8. Turnover from continuing operations was up 12% in total whilst operating profit before exceptional items and goodwill was up 22% at £9.3 million. After goodwill and the investment in Agalinks operating profits were the same as that of last year. Interest receivable, following the large swing from net debt to net cash, brought about by the Pipe Systems disposal and the return of capital to shareholders, was £1.6 million compared with £9.7 million payable in the first half last year.
9. The half year has seen major movements in not only the level of debt, last year end, £304.3 million, to net cash of £119.9 million but also much reduced turnover and profits due to the disposal of Pipe Systems which is now shown as discontinued. We are close to finalising the disposal completion accounts and assessing the taxation and pension implications, but the final outcome should comfortably be within the £36 million parameter previously announced. The tax rate, pre-goodwill is 25% and just under 30% post goodwill. These rates should apply this year and will then move closer to the UK standard rate given the current size of the Group.
The dividend for the half year has been reset at 1.7 pence. As we indicated to you in March this year, the benchmark dividend cover is 3 times as the longer term shape of the Group emerges.
10. The objectives set by the Board at the time of announcing a return of capital were: Creating a strong shareholder base for the longer term
Equitable treatment for shareholders
Simplicity and
Tax efficiency
The tender offer - the largest proportion of a company made available in such a process - successfully met our objectives facilitating the return of £335 million through the acquisition of 130 million shares at a strike price of 255 pence, the top of the range set.
A key feature was the creation of the strong shareholder base we were seeking. It is led by Invesco with nearly 10%, plus Morley, M&G, Tweedie Brown, ABN Amro and Aegon all with over 4%. The top 20 shareholders hold in excess of 60% of the 127.8 million shares now in issue.
11. The cashflow is once more dominated by the Pipe Systems disposal and the return of capital to shareholders. As can be seen this has resulted in a net cash outflow from operating activities of £51.2 million. Of this, £50.5 million is shown as discontinued in the notes to the results. Cashflow from continuing businesses is in line with last year and will remain a focus for the rest of the year. Net capital expenditure for the half year is £8.2 million of which £6.0 million relates to discontinued operations. Over the last couple of years we have invested heavily ahead of depreciation in our Consumer businesses. With that achieved we expect the full year capital spend for the continuing group to equate to depreciation at around £5 million.
12. Shareholder funds have reduced following the Corporate activity of the first half and now stand at £261.5 million. The net cash figure of £119.9 million is before the acquisition of Fired Earth in July and will be around the same level at the end of the year. The cash resources are on deposit with a wide range of banks and are currently earning an average return of 5%.
Goodwill in the balance sheet pre Fired Earth was £58.8 million.
13. Since the half year the Group has bought Fired Earth for £29.5 million. Of the total consideration, £23.4 million was in cash and £6.1 million in redeemable loan notes. Of the loan notes £3.3 million are convertible into Aga Foodservice shares at 250 pence per share.
In the year to 31st December 2000 Fired Earth made operating profits of £2.1 million on turnover of £18 million.
Net operating assets on completion are subject to a pound for pound adjustment, above a benchmark figure of £2.8 million. Net assets on completion were £3.1 million.
Following the acquisition the full year goodwill charge for the continuing group will be of the order of £4.0 million.
I shall now hand over to Stephen who will cover some of the current initiatives.
14. Thank you Shaun. As you know, we have set ourselves the key task of growing Aga as a worldwide brand-driven business. We are making progress. If you pick up an American, European or Australian home interest magazine, increasingly you will see an Aga. We were featured in August, by Time Magazine as an example of European classic design. However, although the brand is known, accessibility has been patchy and that is the major reason as to why sales have been static, as the slide shows. That is changing and we have worked hard in recent months to gear up the sales structures to move off the plateau.
Project 10,000, being launched today, is a two year comprehensive plan to grow Aga by addressing key sales and marketing issues not only in the UK but North America and Europe as well.
15. The first phase has a strong UK bias and is based on creating greater links with Fired Earth through a clearer retail driven focus. Shop refits, relocations and new outlets are all being reviewed in light of our combined approach.
Retail management, staff training and the ability to handle a wide range of products are all being given special attention.
Both within the UK and overseas our Retail outlets will be a focus of attention be they wholly owned or franchisee.
16. Clearly a plan which involves both above and below the line marketing spends will have to be adequately funded. £3m has been allocated over the next 12 months as additional finance purely to drive Project 10,000. The above the line advertising plan is key in terms of both image and message. The adverts I will show you in a moment are very different and emphasising that Aga is contemporary and stylish.
In addition, we are also aware that Aga is a multi-brand - multi-product company and therefore Cast Iron cookware, Rayburn, Coalbrookdale and our wide range of accessories will all receive additional promotion.
The most immediately recognisable feature of Project 10,000 will be our new advertising campaign based on two main themes: Iron Age Man/Iron Age Woman, and Sense of Place - Sense of Purpose.
17. This campaign starts on the 7th September and will appear in Vogue, Tatler, Elle, Hello and in a wide range... 
18. ...of home interest magazines, press supplements, regional papers as well as direct mail. The second theme is Sense of Place - Sense of Purpose, which shows how the product is king and does not immediately associate the Aga with a particular type of kitchen.
19. Uncluttered and clearly contemporary 
20. Again, uncluttered, but with a more period feel. In both settings all tiles and paints used are, of course, Fired Earth. We have heavily involved our shop and distributor staff in the preparation of this campaign and the launch plan announcement sent to them all is available outside.
21. The strength of our combined domestic product offering has not received sufficient attention internally or externally. Within our Consumer and Foodservice companies we have high quality cooking, refrigeration and sink products that combined will now form the Premier Collection.
Targeted at high-end kitchen retailers, where we have been under-represented, we now have a dedicated sales force in place, creating a unique product offering for the UK. Again, this is being launched this week and sales material is available outside.
Rayburn will spearhead the range in its cooking only format which offers the controllability that many customers prefer.
Our products from Falcon and Williams are also designed to meet the increased demand for stainless steel in the domestic market, and Falcon in particular with its Professional series has already made significant inroads.
22. This cross over point is an exciting market segment which we are uniquely placed to address, as Viking and Sub-Zero do successfully in the USA. Moving on to commercial products.
23. The last 18 months has seen a considerable change of emphasis in routes to market. In particular closer liaison with major national accounts means we better understand their menu requirements and can tailor our products accordingly. Public sector spending is set to rise and we are able to provide various financial initiatives to meet their needs.
The foodservice customer base is incredibly diverse and the requirements of fast food are different to banqueting, full service restaurants or bakery, to name but three. Growth exists both within sectors and customers within a sector; it is too broad a statement to say foodservice currently is flat. Targeting is all-important and we have a growing national account sales team.
24. A good example of diversity is marine specification products. Falcon has just won a £500k order with the Royal Navy for the kitchens onboard the fleet of T45 Destroyers. Bakery has immediate potential not just for Mono but for all our companies including Serviceline. All the major supermarket chains are reviewing their Bakery systems with the aim of providing greater choice and freshness; we are now a major supplier to this sector.
Here are two examples of how flexible we are in developing solutions to the same problem.
25. Full service bakery comprising twelve ovens with complete dough handling and preparation behind the scenes. Additionally, the mobile pancake cart outside is an example of how we develop ideas together and this is currently under trial.
26. Williams and Mono working together to provide frozen dough cooked in small batches in an almost plug-in unit that can be installed in a matter of hours. Both of these examples give excellent results.
27. One of the main influences of our current performance and vital to our future growth, is new product development. Our investment in R & D has been ongoing but increased emphasis has been a feature of the last two years. As mentioned earlier, National Accounts now see our development kitchens and design capabilities as extensions of their own marketing departments. Our recent success with MFI on domestic range cookers was as a result of a thorough review of their customer profile and has resulted in the Technic Series. The products highlighted are all being launched now and are only a small sample of what is coming through over the next few months.
Important within these are those products which open up complete new product sectors, such as the all electric range cookers from Leisure and our Fast Fry Vending systems from Mono, so we are adding to, not replacing existing models.
So overall, within the existing businesses, backed by these marketing and product initiatives, there is real potential for organic growth.
I`ll now hand you back over to William to discuss the strategy we are now pursuing.
28. The first major strategic move we have made was the acquisition of Fired Earth. We spoke in March of seeking an empathetic brand for Aga and Fired Earth was already then our top target. Fired Earth`s management team were similarly enthusiastic and this undoubtedly helped in the negotiations with Pru Ventures, the primary vendor. In the current year sales are up 25% as the new store openings of the last three years have come into effect. Profits will be well ahead in 2001. Fired Earth brings to Aga retailing flair and experience. There are now together over 130 UK Fired Earth and Aga shops making it crucial that we treat retailing as a core competence. It is also the target customers and the sales process involving home surveys, that make the businesses so compatible. In a refitted kitchen with cookers; soon fridges, tiles, paint and flooring we can provide products accounting for over half of what may be a £20,000 plus investment.
29. Fired Earth helps create a better geographical balance to our UK retail operations, in particular as it provides the Greater London base we were seeking, having shops inside the M25 at Chiswick, Kingston, Fulham, Hampstead and Wimbledon It also has larger format out of town Inspirational stores near Banbury, Bedford and Orpington and soon at Warmington Mill, Peterborough. 
30. In developing Fired Earth we will support further shop openings. We already have 3 pilot projects in train involving Aga/Fired Earth formats and Banbury - the Fired Earth Head Office - will be refitted in October.
Fired Earth already has 9 stores outside the UK, through licensees. This will now be part of our greater overall onus on growth outside the UK.
The major new development at Fired Earth has been bathrooms - 60% of value of the product sold in a Fired Earth bathroom is the core tile product. It has at Ebury Street in SW1 its first dedicated bathroom store. It has seven major displays. It is already a £2 million business and is growing rapidly.
Finally, under Fraser Allan as Managing Director for the last two years, Fired Earth has an energetic professional team. We will be looking to use the flair of its founder and creative director, Nicholas Neale, on projects across the whole Group.
31. Following the Fired Earth acquisition, the Group still has over £100 million net cash. We should expect to be a normally geared company by the end of next year and have over £200 million potentially to invest or consider returning to shareholders. So, moving forward, where will the onus be? The up market branded houseware theme we have developed will continue. We have an exciting platform on which to build. Further compatible brands remain on our target list, particularly where we can see the creation of stronger international routes to market. In Foodservice we have long sought to expand in prime cooking in the USA. We remain, however, cautious about jumping on a fast food bandwagon where growth has, at best, slowed. There are, however, in cooking, bakery and refrigeration opportunities about which we are enthusiastic. Further, we are also looking at European as well as US based opportunities.
The expansion plans for the consumer and foodservice side of the business are compatible, particularly as we do expect that the blurring of the line between the two to increase.
Further, as Stephen emphasised, we are committed to investing to realise the potential of our existing operations. That applies not only to the investment programme in Aga but also to our approach to new product development, to staff recruitment and to creating the infrastructures to take our products into international markets.
32. So what are we achieving to date - looking now at current trading. The group performance is traditionally second half weighted with the run up to Christmas key to both commercial and domestic markets. The order book is currently satisfactory but visibility forward is under 2 months in most operations. Aga and Fired Earth expect good second halves. Leisure is the most vulnerable operation to volume and margin pressure that we have, although the impressive new product range makes us well positioned. On commercial products, Falcon and Williams had flat second quarters and are vulnerable if the pub/hotel/restaurant chains cut back. Current order intake is pleasing. Mono has a strong order book through into 2002.
The second half will see a first contribution from Fired Earth, it will also have the additional costs to which I referred of gearing for growth, notably at Aga, of around £2 million.
Overall operating performance continues to be good. We expect the sound spadework of recent months will drive performance, but know that we are not immune if market growth rates, and in particular consumer spending, slows.
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So, overall, what are we looking to achieve. We have repositioned the Group. We have modified its ethos and style. At the centre and down through the structure we aim to add greater imagination and incision to the competence and solidity the Group always had. We are now often brand-driven; we recognise that retailing is now a core competence. We are looking to expand our consumer operations in housewares and play to the cross-over points into commercial foodservice. We are looking to grow in niche markets in foodservice-like bakery and to have close national account relationships where our service and online capabilities add to straight manufacturing strengths. We are looking to invest in these areas to add to the platform we have. We recognise the simple need to add to shareholder value through earnings growth. We do respond rapidly to changing circumstances and market expectations as the later days of Glynwed showed. We freed up substantial capital for shareholders and now have operations better placed to grow and to appeal to investors than at any time in the last decade.
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