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2. WBM: Good morning. Aga Foodservice Group`s performance in the first half of 2002 was pleasing and we continue to make steady progress to meet the financial and strategic targets we have set. We have created in the last 18 months the Group we envisaged prior to the Etex disposal. We have raised the game of existing operations and brought in new businesses. There is now "joined up thinking" across them that creates value that would not be available to stand-alone businesses. The message put out to our operations is "You are not alone but very much part of the Aga team". We have, indeed, made a number of important acquisitions. Fired Earth, Elgin and Hall and US retailer Domain give us empathetic brands and products, with a greatly enlarged delivery channel targeted directly at our chosen customer base. We have taken this one step further by acquiring a shareholding in Grange. We have also made important changes to our product range. While we have launched new products, we have also disposed of the lower margin eye-level and `slot-in` cookers to reduce the risks in our overall portfolio.
In Foodservice, the acquisitions of Adamatic, Millers and Belshaw have enabled us to target complementary markets with strong new products alongside our existing Foodservice range.
Our acquisitions have all made good progress, and we have identified further targets that would fit with the shape of the Group we are creating.
There are further major sales and marketing efforts this autumn and we remain fundamentally optimistic in spite of the understandable concern about a consumer downturn. In foodservice, the quiet markets in prime cooking and UK refrigeration are being compensated for by strong bakery markets.
This morning Shaun Smith, Finance Director, and myself will provide an analysis of trading performance and our financial position. Stephen Rennie, Chief Operating Officer, will review the real progress made with initiatives to which we have referred before and I will discuss the strategic framework we have established and specifically current trading.
3. But firstly, the results for the half year. As you see turnover from our continuing operations was sharply ahead at £144 million, 50 per cent up on the prior year`s £96 million. Turnover from all businesses acquired since June 2001 was £40 million including turnover from businesses acquired this year of £16.6 million. Turnover from the now sold Flavel/Leisure product lines in the first half was £7.0 million. Leaving aside all 2001/2002 acquisitions, organic turnover growth was approximately 8 per cent. In the first half the turnover split between consumer and foodservice was 54 per cent to 46 per cent, versus last year`s percentage split of 48 to 52.
4. Seen geographically, 70 per cent of turnover in the first half year was in the UK and 24 per cent in the USA. This compares with 2001 when 81 per cent of turnover was in the UK and 11 per cent in North America. The balance is changing and we should expect UK turnover to fall to half the turnover and Europe to account for a greater proportion as acquisitions are made. 
5. Looking at operating profit before goodwill, the split between consumer and foodservice was 50:50. Operating profits at £13.2 million were 40 per cent up on the prior year and excluding 2002 acquisitions were 15 per cent up. 
6. Looking at performances within the Group. Aga-Rayburn is a key operation and it achieved record profits with top line growth driven by the higher marketing spend of Project 10,000. The second quarter was seasonally very strong for Domain and it contributed $2.6 million in the period since acquisition. In the full year to June 2002 it made a profit before tax of $4.0 million.
Fired Earth`s markets, notably in the South East, proved quiet in the second quarter but the results were satisfactory as it absorbed the start up costs of the new inspirational stores programme.
The old Flavel/Leisure, historically a high turnover/low margin component of the Group, was seen a year ago as having significant improvement potential. In spite of disruption caused by the sales to Beko and Kinder, the relaunched Rangemaster business came through the process well and is better placed looking to the stronger second half.
Elgin & Hall has taken on sales for Coalbrookdale Stoves and after a weak start is performing well.
7. We have set Project 10,000 as an important benchmark. The graphic shows progress is being achieved and first half volumes of Aga branded cookers reached 4,800 and we should expect to move well over 9,000 for the first time this year. The UK was strong; overseas markets, where we remain largely in preparatory stages, were flat. Rayburn meanwhile saw growth of over 10 per cent year on year in the first half. 
8. Switching to foodservice, Millers had a particularly strong first half and after a fairly slow start Mono had an impressive second quarter. Millers adds appreciably to our facilities management capability and here, alongside Serviceline - which had an excellent first half - we have the basis to be a force in facilities management. Where trading has been more difficult is in UK prime cooking and refrigeration with both Falcon and Williams down more than 10 per cent down year on year. In the USA, however, Victory had a better first half. Belshaw not only provided an immediate financial benefit but also highlighted the opportunities to offer broader product ranges to major accounts. Also, our bakery operations now represent over a third of foodservice turnover. I shall now hand over to Shaun for more detail on our financial performance and position. Shaun.
9. The first half year saw a strong performance with operating profit from continuing operations after goodwill up to £10.2 million from £5.6 million last year. Goodwill charged for the half year was £3.0 million and with goodwill in the balance sheet now £120 million, should be around £6.3 million for the year, taking into account the acquisitions of Domain and Belshaw.
The loss from discontinued operations of £0.5 million relates to the cooker and sinks businesses disposed of to Beko and Kinder. We continue to supply Beko under the sale contract pending the introduction of Turkish made products. We have made a provision for these supplies and other costs and expect these to net the £4.8 million proceeds of the disposal.
Net interest receivable for the second half of the year will be slightly behind that of the first half`s £1.9 million, reflecting the effect of the acquisitions made to date and the lower interest rates currently available on cash deposits which are at present, slightly, below 4 per cent.
10. The Group`s tax rate for 2002 and into 2003 is expected to be below the UK standard rate and not dissimilar to the 29.5 per cent shown at the half year (24.1 per cent excluding goodwill). We are benefiting from low tax rates payable by some acquired companies. 
11. The large growth in earnings per share reflects the strong underlying performance and the re-investment back out of cash into operating profit streams. Earnings per share before goodwill amortisation are up 74 per cent from 5.0 pence to 8.7 pence whilst basic earnings per share are up 88 per cent from 3.4 pence to 6.4 pence. The dividend is being increased 12 per cent to 1.9 pence per share reflecting the earnings growth and our desire to maintain a progressive dividend policy - we maintain a benchmark of 3 times covered dividend based on basic EPS. The cash cost of the dividend will be approximately £2.5 million based on the 128.3 million shares currently in issue.
12. As was seen last year, working capital is absorbed in the first half and there is a strong second half cashflow. We expect to see that again in the second half this year. Operating cash outflow on significantly increased turnover was slightly higher in the first half of 2002 at £2.1 million, compared to last year`s £0.6 million. 
13. On the balance sheet the Group net assets totalled £263.6 million of which, £120 million was goodwill. Distributable reserves were circa £130 million. Trading capital was £75.7 million compared with £93.7 million a year ago which included a £25 million receivable due under the Etex disposal agreement. The balance sheet highlights the strong cash position and the resources available to grow the Group further. Net cash of £82.5 million combined with the potential to take on a reasonable level of debt, still suggests we have considerable flexibility to make acquisitions or buy back shares as appropriate.
Further, we have resources to invest in the businesses. Capital expenditure in the first half totalled £4.4 million compared to depreciation of £2.9 million. The full year depreciation charge will be just over £7 million with full year capital expenditure some 1= times this. We are quite prepared to invest for organic growth. For example, at Rangemaster we are investing in the site creating a development centre for range cooking; we have also bought new equipment for the sinks operations; we have upgraded the enamel shop at Aga; we have increased Victory`s capacity and we will expand Miller`s premises.
14. Pensions remains an area to which we pay close attention, the scheme being substantial. It had a strong position in June 2000 when last formally valued and was fully funded at 31st December 2001. Our cautious approach, prudent provisioning with the Etex disposal and volatile markets make it too early to conclude that the 2003 valuation will lead to higher pension costs. As highlighted in March, we will as a precautionary step, have raised cash contributions into the scheme to £6 million in the current year. Since the last valuation there was the disposal to Etex and a trend towards a more defensive investment stance which saw the fund move from circa 70 per cent in equities in mid 2000 to 40 per cent at June 2002. In addition, last year we closed the scheme to new entrants.
We continue to believe we have taken the appropriate actions at this stage.
I will now hand over to Stephen who will update you on operational initiatives.
15. Developing Aga-Rayburn is a central objective and we are pleased with the progress being made. The Iron Age campaign succeeded in broadening the appeal of Aga. We have followed this up with major new product launches - The `Six-Four Series` - six burners and four ovens - is already a success : the new advert shown here first appeared in the Sunday Times last weekend. There is the refrigerator, which is now available introducing the Ice Age; there will soon be the Aga Five Series - 3 Aga ovens, 2 conventional ovens, 4 gas burners giving the customer the best of both worlds and the power-flue Rayburn - out this month - no chimney required, making Rayburn a more flexible and more urban-friendly product and giving Rayburn a lower total installed cost. The new Omnia cookware is proving a success. Taken together, we have in cast iron a broadened range with the fuel flexibility to grow in the UK and overseas in support of Project 10,000.
16. Alongside new product development, we have an exciting retail outlet strategy not just with shop upgrades for Aga shops from Truro to Thame, Kidderminster and Holt, but also for Aga and Fired Earth together in the new inspirational stores. These inspirational stores are between 4,000 and 7,000 square feet and now account for over half of all Fired Earth retail space. They attract our targeted affluent customers with an encompassing home fashions offering. Warmington Mill has been joined by Knutsford in Cheshire; High Wycombe on the John Lewis, Junction 4 exit from the M40 and at Cobham in Surrey. This month we open alongside Harvey Nichols in Birmingham`s Mailbox development - our first Mall store - and our new Aga store in Edinburgh, 100 yards from Fired Earth, will create a hub in the capital for a specific Scottish marketing effort. 
17. Outstanding, exclusive product is what drives Fired Earth and the new 225-page catalogue, "Inspirational Interiors" showcased outside, contains some stunning new products. Similar comments apply to Elgin & Hall which has a new magalogue - magazine come catalogue - out next week. Elgin & Hall is taking on the Coalbrookdale Stove business range and presenting it as part of a new heating studio concept, the first of which is now open in Tunbridge Wells.
With the retail framework of 80 Aga shops, 45 Fired Earth shops and 8 inspirational stores in place, the focus this autumn is to raise local awareness using a myriad of events driven by the shop themselves to raise footfall and sales. For example, there is Aga`s 80th birthday roadshow covering the country this autumn as it was in October 1922 that Gustav Dalen registered his invention of the Aga. To commemorate this there is a new book "Aga ; The Social History of a Kitchen Classic" which will receive wide media coverage this autumn.
Taken together, with the continuing growth in user numbers at Agalinks, the daily news updates provided online in the Aga Times, the emphasis on putting the UK consumer story across has never been greater or more creative.
18. Looking now at the USA. Over a year ago we set about upgrading our US distribution structure. We now have the service support and quality of marketing material to take a more ambitious approach to the US for Aga. Domain is also there to set standards across our US operations. The opening of two Aga Domain stores in October, in Fair Oaks, Virginia and Princeton, New Jersey provide excellent test beds. Domain are making the blend of Aga and Domain kitchen furniture seamless. The meticulous approach they have adopted should optimise the chances of success. 
19. So far this year the creation of Rangemaster as a focused cooker and sink operation has been a particular success. We have had a tremendous response from the industry to the launch of Rangemaster as our brand not just as a product and have over 1,000 more displays now than we had a year ago with sector leaders like MFI, Moben and Magnet becoming increasingly important customers. We have supported the relaunch with a £1.25 million investment programme creating at Leamington Spa a product design and development centre and have relaid and upgraded the production facility. The new products, the Elan and Toledo, have been well received and the current order book is strong. As you can see we also have an excellent new advertising campaign for the autumn. 
20. In sinks we remain the UK sector leader. The re-emergence of stainless steel as the primary material for sinks is a benefit to us. With new products like the benchtop, shown here, we are moving upmarket and we are also gaining market share again with major accounts such as MFI and Homebase. The sinks business is now well placed and ready to re-establish itself in export markets from which it has suffered a steady decline since the mid 1990s. Again, we have made the necessary investment to enable the business to drive forward. 
21. Moving now to our foodservice operations and in particular to our growing bakery business. Mono has maintained the momentum of 2001 with Safeway and Marks and Spencer continuing their investment programmes. Millers, having Sainsbury and Somerfield as key accounts, has adjusted rapidly to being part of the Group and has a good forward order book. Belshaw also adds to the UK portfolio and brings its own customer contacts. Belshaw`s salesmen have joined Mono`s team, strengthening the links with Asda and Morrisons. We have been looking in these good times for sales of capital equipment in bakery to broaden the business. Mono is now to put energy into marketing products which can be taken beyond its traditional supermarket and artisan baker contacts. Fast fry developed with McCains can become a major vending product and Photocake has applicability to the event markets - conferences, weddings and corporate entertaining. Today`s results, shown here by Photocake, are a pilot for Mono`s marketing campaign designed to raise its profile.
22. When we acquired Millers we highlighted that it took us further towards facilities management. Millers distinctive approach to deep cleaning of bakeries and rotisseries has won it major contracts with Somerfield, Sainsbury and Waitrose. It is gearing up for expansion in this area over the next 2 years Serviceline - provides service support for a broad range of foodservice products and is enjoying a record year. It is looking to align itself with Millers. Overall the need to comply with food hygiene and gas safety regulations are placing an onus on major groups to ensure that maintenance is carried out by engineers with the relevant qualifications.
23. In the US we acquired Belshaw in April. Its major account is Walmart and it sells to specialist chains like Krispy Kreme and Dunkin` Donuts alongside the supermarkets. It is broadening its product range to cover both fried and cooked from frozen doughnuts. Fifty years of trading have given it a broad product capability but profits fell last year and it needs to be re-energised. We are looking to upgrade its facilities and broaden its range by adding European products. This should give it renewed impetus. It has an international reach, notably in the Far East, which can assist all our bakery operations. We have in place an industry veteran whose role it is to present to major accounts in the USA the breadth of the capability that we have as a major Anglo-American bakery and refrigeration business. 
24. In refrigeration, with Williams we have had to address quiet domestic markets. Here with a succession of dealers leaving the market, the importance of our national account position increases. The contracts we have with Sainsburys and the four year exclusive heavy equipment supply agreement with Compass indicate the direction in which the business is going. This should make our international operations of greater importance. It is reflected in the decision to open a sales office in Dubai. Victory, meanwhile is emerging from a long transitional phase and is now building its productive capacity which, alongside a sound order book, will enable it to make better returns.
25. In prime cooking Falcon continues to face weak markets given spending cutbacks by many brewery and hotel chains over the last year. We have responded by seeking to redirect the sales team making major changes. This, in combination with new products in light and medium duty ranges, is minimising turnover and profit declines. The domestic range - the PKR - is selling strongly and represents well over 10 per cent of Falcon`s turnover. This, in conjunction with our Aga refrigerator shows how high end domestic aligns with foodservice technology. We have with Falcon a formidable capability and product range. A key development requirement is to reduce dependence on the UK and establish a European growth platform. I hope we have highlighted the inter-connections between our businesses and how they fit into a larger picture. Indeed, they are not alone.
26. Over the last 18 months we have come a great distance, creating a strong business with an identifiable culture of its own. Aga has become the centre stage business with a strong grouping of empathetic brands adding value to Aga, but also with growth stories of their own. In foodservice we have notably in bakery created new opportunities which are recognised in the industry itself as important developments. Managerially we have sought to fit diverse cultures into one pattern of play with a strong central team, the only supervisory tier. This has provided the direct access to Group directors which the management teams in the acquired businesses, often entrepreneurs and founders of the business, in particular find attractive. We have been consistent in pursuit of a development plan using the resources available to us after the Pipe Systems sale. The key investment themes are:
- To make Aga a major international brand using the values of discrete affluence, comfort and reliability.
- Expansion internationally in foodservice in niche markets and here bakery has been established as a core competence.
27. Overall we have invested over £80 million in the last year in support of these plans. The acquisition of the 27.4% interest for Euros 5.5 million in Grange announced yesterday was one more step in the process. Grange, founded in 1905, is a high end furniture brand and manufacturer. Grange has a turnover of around Euros 70 million. It has been looking for a broader product offering not only for its own retail stores but also for its distributor owned outlets. It has 8 shops in France and 16 outlets in the USA which sell to architects and interior designers. Importantly for us, it has across Europe a distribution structure involving a large number of independent family owned retailers. For Aga, the investment can work on a number of levels. Grange provides early access to retail space; the expectation is to take Aga and Fired Earth to at least 3 Grange French stores within six months.
A retail concept is to be devised to take to the wider distribution base. Grange becomes part of the home furnishing axis within the Group that includes Fired Earth and Domain. Dominique Mercier, Chief Executive and majority shareholder in Grange, is enthusiastic to work with us.
28. Of the Euros 5.5 million investment we are making, Euros 1.5 million can be deferred until 2003. 2001 was a difficult year for Grange, bringing a growth phase to an end. Weak US markets at the end of the year and rationalisation costs at its French factories, led to a pre tax loss of Euros 3.4 million. The current year should see a return to profitability. Aga will work with Grange on its continuing efficiency drives and in particular on making more of the strong distribution structure. It is a modest investment, but a big opportunity. For us it is the low risk, high potential approach we have been seeking by which to enter the continental markets. 
29. We will invest more. We have identified acquisition opportunities and in a number of cases are in due diligence phases. We should hope to conclude further transactions this year and maintain the kind of balance we have now between consumer and foodservice businesses. When we have reached a position of turnover of around £0.5 billion, under half the business being in the UK and the remainder divided between the US and Europe, we will have a sustainable framework on which to build. In creating that framework we have set an end 2002 timeframe to review our overall capital requirements. We will then formally review the position as part of the Group`s strategic planning processes. This process will include an appraisal of whether funds could be returned to shareholders. Irrespective of that, in the current turbulent market conditions we believe that there could be opportunities to buy back our own shares and we are ready to do so if appropriate opportunities arise.
30. Moving now to current trading. July and August were in line with expectations. Aga-Rayburn matched 2001 and the lead indicators of home surveys and enquiries were ahead. Fired Earth had a record ever week in July and was quieter as expected in August. The marketing programmes now underway should ensure a busy autumn.
Domain traditionally has modest third quarter performance and has traded in-line with expectations although the Labour Day weekend was excellent. Judy George and her impressive team are confident in the new ranges introduced for the autumn which reinforce the cocooning theme which has attracted attention all this year. Rangemaster also enjoyed a strong sales period and has a good order backlog. In looking at year on year performance this could prove significant given Leisure`s weak second half to 2001.
In foodservice, the bakery businesses are well set for the autumn with recent orders showing delivery dates through into 2003. We expect the quiet period in prime cooking and refrigeration to continue through to the end of the year.
Taken overall, there are key trading months ahead but our view of the year remains unchanged in spite of the ever nervous markets in which we are operating.
31. So overall the messages are: - We are pleased with progress to date.
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We have been determined with operational initiatives - for Aga, Rangemaster and Falcon in particular - and are seeing some rewards.
We have a clear picture of the Group we are creating and have in train the steps and the acquisitions necessary to complete it.
We have a strong financial position which we will not waste and, as we have always said, we will adjust the financial framework if strategically and opportunistically it is appropriate.
We share the market`s concerns in some scenarios for our sectors, but expect to be resilient. So we remain cautious, but on fundamentals upbeat.
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