Note: all references to profit in this review refer to either underlying operating profit or underlying profit before tax, unless stated otherwise. A reconciliation of underlying to reported operating profit is provided below. A reconciliation of underlying to reported profit before tax is given in the Group Finance Director's Review. Prior year comparators have been adjusted for the restatement of results at Alumasc Precision described within note 1 to the financial information contained in this announcement.

Note: the allocation of property disposal gains, restructuring costs, brand amortisation and fair value adjustments to business segments is provided in note 2 to the financial information.

Overview

Strategy and Performance
Following the strategic transformation of the group towards the end of the last financial year through the acquisition of Levolux, the UK's leading solar shading company, and the disposal of Brock Metal, 2007/08 was a year of significant progress for the group in terms of both strategic development and financial performance.

Alumasc's strategy of seeking superior shareholder returns by growing its core premium building and engineering product businesses, with particular focus on the development of the group's portfolio of sustainable building product businesses, led to both significantly better financial results and an improved quality of earnings during the year. Approximately two-thirds of group revenue and over 85% of group operating profit is now generated by the Building Products division. Well over half of this divisions' revenue is derived from sustainable building products, where we believe demand is growing faster than for the construction market as a whole.

The group added to its portfolio of sustainable building products companies with the acquisition of Blackdown Horticultural Consultants (“Blackdown”) on 31 March 2008 for a total purchase consideration of £2.0 million. When combined with Alumasc's existing green roof business under the ZinCo brand, this has given Alumasc the UK number 1 market position in the embryonic and rapidly expanding market for green roofs.

Group revenues from continuing operations in the year to 30 June 2008 increased by 21.4% to £125.8 million, and underlying profit before tax rose by over 50% to £9.6 million, driven by acquisitions and the continued growth in demand for sustainable building products. Group operating margins improved from 7.3% to 8.9%.

Total group profit before tax, after gains from property disposals and exceptional costs and after including Brock Metal's pre-disposal profits in the prior year comparator, increased by nearly 12% to £10.0 million.

Alumasc Precision Components
The revelation of the cumulative over-statement of profit and assets by some £2.5 million at Alumasc Precision Components, announced in our interim management statement on 19 May 2008, was undoubtedly the low point of the year, and was particularly frustrating given the ongoing strong trading performances across the rest of the group. The investigation work is now complete. Robust and swift action was taken to strengthen general and financial management at Alumasc Precision Components, and more wide-ranging actions are ongoing to improve business systems and controls. The business remains profitable, and there are opportunities for further improvement, many of which have been identified and are being implemented by the management team.

Health and Safety
The group's number one priority continues to be to provide a safe place of work for employees, and health and safety remains the first agenda item for all subsidiary and group board meetings. Further details on the group's health, safety and environmental performance will be given in the Corporate and Social Responsibility section within the Annual Report.

Operating Review: Continuing Operations
Group revenues grew by 21.4% to £125.8 million. Of this growth, approximately 17% was attributable to the full year benefit of the acquisition of Levolux on 1 May 2007 and the acquisition of Blackdown on 31 March 2008. Good organic growth in the Building Products division due to growing demand for sustainable building products was largely offset by some contraction in the Engineering Products division where Alumasc Precision began the year with lower activity levels, as previously reported.

Group operating profit from continuing operations improved by £3.7 million, or 48.9%, to £11.2 million.

Group operating margins improved from 7.3% to 8.9% as a result of the change in mix caused by the addition of recent acquisitions into the group's portfolio of businesses and increased revenue and profitability across most of the Building Products division.

Building Products

Building Products Divisional Operating Performance

Divisional revenues grew by 40% to £83.5 million, with much of the growth driven by the acquisitions described previously. Organic revenue growth was also strong at 11%, with nearly all product brands within the division reporting good performances.

Divisional profits improved by 54% to £10.7 million. Organic profit growth was 17%, benefiting in particular from improved revenues and profitability in the MR Facades and Alumasc rainwater brands, and further export-led growth for Gatic engineered access covers and Gatic Slotdrain. 2007/08 was another record year for Timloc building products, which are sold mostly into the new-build housing sector. This was a particularly notable performance in view of more difficult conditions experienced in the housebuilding market as the year progressed.

The table below shows an analysis of divisional revenues by end user market segments. Of note are:

• The increased proportion of divisional revenues attributable to the new-build private commercial market, now 46%, compared with 42% last year, mainly due to the acquisition of Levolux. This has been a buoyant market in the last 12 months and current order books remain strong in this area.
• The relative importance to Alumasc of the new-build public non-residential sector market with many of the group's products used in major public buildings, particularly schools and hospitals. This was also a buoyant segment in 2007/08, and is expected to remain so in the current year given government funding commitments.
• The relative importance of the public housing repair and maintenance sector to the group, particularly through sales of MR exterior wall insulation products and Pendock profiles, used mainly to enclose exposed internal pipework.
• The low overall proportion, 11% of divisional revenues, exposed to the weakening new housebuilding market. Most of this relates to Timloc building products.

Building Products' divisional revenue in 2007/08 analysed by end-user market

Source: Alumasc estimates

Following the acquisition of Levolux last year and the group's increased strategic focus on growing its sustainable building products businesses, divisional results have been further segmented this year (see note 2 to the financial information) into:

• sustainable building products, sub-divided into those products allowing customers to improve energy efficiency and manage water in the built environment;
• premium building products.

Details of the allocation of the group's brands to these segments are given in note 10 to the financial information.

Sustainable Building Products – Energy Management
Revenue from products that assist customers to manage energy use in buildings almost trebled to £35.5 million mainly as a result of the acquisition of Levolux in May 2007 and Blackdown in March 2008. Organic revenue growth was almost 40%, with growth in demand from public sector refurbishments, further penetration into new build applications for the MR Facades product range and another record year for Roof-Pro systems, which included a substantial contract at a retail development in the first-half.

Profits in this segment more than quadrupled to £4.8 million, attributable to both acquisition-led and organic sales volume growth. Organic growth, together with the inclusion of recent acquisitions in the profit mix, led to a 4.7 percentage point improvement in operating margins to 13.7%.

Levolux, the UK's leader in solar shading systems, had an excellent first full year in the group, with order books rising to record levels during the year and a strong order pipeline carried forward into the new year. The business continues to seek to expand export sales, particularly into Ireland and the USA. During the year the business introduced a new patented insulation fixing bracket that is designed to prevent heat transfer from external louvres into the building, thereby avoiding condensation. Major projects of note during the year were a further building at Chiswick Park in London, an office in Threadneedle Street in the City of London that incorporates photovoltaics into glass louvres and, in the USA, a headquarters building for The Royal Bank of Scotland, and work at the Harley Davidson Museum.

Blackdown made a good start in Alumasc and contributed immediately to group earnings. The UK market for green roofs is fast expanding and Alumasc is supporting the realisation of this growth potential by investing in additional capacity and resources. Order books continue to grow.

Sustainable Building Products – Water Management
Revenue from products that manage water, both above and below ground level, increased by 4.6% to £33.7 million. Most brands in this segment had strong performances, although overall growth was constrained by lower revenues from Metal Roofs following the completion of the major Fjardaal contract in Iceland last year and lower activity levels at Elkington China following the completion of some major international airport contracts.

All other brands in this segment reported good growth. Of particular note was the widened distribution of Alumasc rainwater products through further agreements with merchants, the launch of the Linearis shower drain and the addition of Minislot and Facadeslot to the Gatic Slotdrain range. A high profile contract for Alumasc Heritage cast iron rainwater products was a major project at the newly refurbished St. Pancras International Station. Alumasc also supplied bespoke fascia and soffit products to the new roof being installed on the Centre Court at Wimbledon. Currency appreciation impacted the profitability of drainage and waterproofing brands where certain materials are imported from Europe, despite buoyant overall activity levels.

Both Gatic brands enjoyed another strong year, albeit more uneven domestic demand from airports and distribution centres and significant increases in cast iron and steel material costs impacted access covers and Slotdrain production respectively. Management was nonetheless successful in again delivering profitable growth through further development of export markets whilst recovering increased material costs through a combination of selling price rises, more cost effective sourcing and internal production efficiency gains. Significant successes in the early part of the year were contracts to supply over 10 kilometres of Slotdrain to Barcelona airport and a major contract for the supply of two thousand access covers to a Caribbean utilities project.

Profits in this segment increased by 5.6%, at slightly improved operating margins of 14.8%.

Premium Building Products
Revenue and profits were each a little lower than the prior year in this segment, largely due to a reduction in sales volumes at Scaffold and Construction Products as a result of lower demand from Ireland and start up costs associated with the in-house manufacture of Pendock profiles.

Pendock has responded to increased competition in the pre-formed plywood pipe boxing market in recent years by manufacturing in-house. This has allowed the business to establish a stable and more efficient cost base that is no longer dependent on imported product from Europe, thereby avoiding the impact of the appreciation of the Euro against Sterling during the year. Encouragingly, sales volumes, particularly into the social housing sector, improved in the second half of the year.

Timloc housebuilding products had a record year benefiting from widened geographical distribution and new product launches. A particular success was the cavity closer launched in the final quarter, with further growth from other new products such as gas barrier supports that have been introduced in recent years. Profitability also benefited from efficiency gains though recent investments in automation.

Engineering Products

Engineering Products' Divisional Operating Performance

Across the Engineering Products division, profits remained stable at £1.7 million compared with the prior year, despite revenues that were 3.7% lower at £42.3 million. Activity levels were down in the first half of the year at Alumasc Precision but Alumasc Dispense benefited both from improved demand and from efficiency gains in the second-half arising from the relocation of the business onto a single new site in Kettering at the beginning of the calendar year.

Alumasc Precision
Alumasc Precision's revenues were 5.8% lower than the prior year mainly due to two older established automotive projects coming to an end at the start of the year. New projects for Aston Martin, Caterpillar, Deutz, Siemens and Rotork began to ramp up in the second half year, resulting in final quarter sales ahead of the prior year. These projects will be complemented by new work commencing in 2008/09 with Jaguar and Land Rover for a suite of interior products. In addition, we will begin to supply components to a new customer within the Caterpillar group, based in Kiel, Germany, which produces large diesel engines used, for example, to power cruise liners. Despite the reduced levels of profitability at Alumasc Precision Components highlighted by the recent investigation, this business remains profitable and there is much potential for further improvement, which should be assisted by the anticipated growth in sales volumes described above and a lower overall level of new project start-up costs. Dyson Diecastings, the sister business to Alumasc Precision Components, was unaffected by the investigation and had another good year, recording improvements in both revenue and profits.

Alumasc Dispense
Alumasc Dispense had a much improved year during which profits doubled, benefiting from the success of its supply of countermounts, taps and decorated glasses to the drinks industry and a reduced cost base following the relocation of the business to one site in Kettering. A noteworthy success was the Beck's Vier condensation countermount used for a highly successful product launch that was rated by AC Nielsen On-Trade as the most successful draught launch of the decade. An exciting development for the business was winning a first soft drinks contract with Britvic for a condensation font featuring the Pepsi brand.

Prospects
Alumasc has begun the new financial year well with order books ahead of 12 months ago. Factors likely to affect performance in the remainder of the year are:

• Growth in demand for the group's sustainable building and engineering products
• The degree of growth or contraction in UK construction activity, particularly in new commercial and new public sector buildings
• The level of demand in the public sector refurbishment market, particularly exterior wall insulation for housing associations in Glasgow and the M62 corridor
• Progress in Alumasc's ambitions to grow export sales, particularly in the USA and Europe
• The extent to which recent rapid cost inflation on metals, energy, other oil-based materials and imports from the Euro-zone and the United States can be mitigated through selling price increases
• Success in winning major building project work generally, including, in particular, work on the London Olympics
• The level of demand from OEM customers and new work wins at Alumasc Precision
• Business performance improvement plans at Alumasc Precision.

Overall, Alumasc is well positioned to meet the challenges that market conditions will bring in the remainder of the year.

Paul Hooper
Chief Executive

Published Wednesday 12th September 2007