Chairman's Statement

Financial Results

I am pleased to announce that during the first six months of this year the Groups turnover increased to 88.6m (2002: 80.2m), 10.5% up on the same period last year despite the continuing difficult economic environment.

Operating profits (before goodwill amortisation) were 2.5m (2002: 3.1m).  Whilst improvements in profitability have been made in some areas, the continued growth of our Inventory Management Services operations, 32% increase in turnover in the last 18 months, has required substantial investment in our infrastructure, people and systems.  We are pleased to report that the roll out of our new Company wide IT System  (IBS²) is accelerating.

These profits are stated after charging the previously announced 0.3m of restructuring costs in our manufacturing operations which, whilst impacting these results, will benefit the year as a whole.

During this period of growth, net debt has continued to be reduced, ending the period at 14.0m, down from 16.5m at the year-end.  This reduction has been achieved by the continued focus on working capital management. As a consequence the interest cost was reduced to 0.4m (2002: 0.5m).

The tax charge of 0.6m (2002: 0.8m) represents an effective rate of 28%, which is similar to last years rate of 27%.

Dividend

The Board intends to pay an unchanged interim dividend of 0.8p per share.

Operating Performance

First quarter sales for the UK companies were marginally ahead of Q1 2002, despite some customers suffering from lower order intake.  The US business performed well ahead of last year.  In addition, second quarter sales improved as new contracts were implemented and volumes from existing customers in the UK and US increased.

The largest of the new contracts, which started in June 2003, was the extension of our relationship with Land Rover where we secured a new five year contract to supply a variety of parts for their existing and new vehicle ranges.  As I reported on 27 March 2003, the absorption of start up costs will provide for little profit contribution in the current year - full benefit of the contract will be felt starting in 2004.

Current Trading & Prospects

New multi year contracts and extensions, worth several million pounds per year, have been won in the first half from our current customer base.  These contracts will be serviced out of existing Distribution Service Centres and continue to provide growth opportunities in control systems, the rail industry and from the Ministry of Defence.  These will benefit the Group over the second half and the next several years.

We continue to invest in our development to support our expansion.  The Board remains confident of achieving growth during 2003 and beyond in the UK, USA and export markets.

Graham Titcombe

Chairman      5 August 2003