DS Smith Plc

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DS Smith Plc

• Preliminary Results 2003/04
• 24 June 2004

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Antony HichensChairman
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Headlines

• PBT 1 up 2 at 81.4m
• EPS 2 up 1 at 16.9p
• Cash inflow after dividends, before net
  acquisitions up 3 at 33.1m
• Robust performance, given weak paper market
• Further advances in Corrugated Packaging and
  Spicers
• Strategic development LINPAC Containers
  acquisition
• Full year dividend maintained at 8.2p 3

1 before exceptional items and amortisation of
intangibles 2 before exceptional items and
amortisation of intangibles and restated for the
bonus element of the rights issue 3 restated for
the bonus element for the rights issue
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Financial Review

• Gavin Morris
• Group Finance Director

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Profit and Loss Account
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Earnings Dividends
1 before exceptional items and amortisation of
intangibles 2 restated for the bonus element of
rights issue final dividend 5.6 pence interim
actual 2.8 pence 2.6 pence restated rights
issue adjustment factor 0.933 3 free cash flow
before net acquisitions and dividends/dividend
payable in year
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Acquisitions

• UK Corrugated
• LINPAC Containers UK packaging group - 166.8m
  net
• Macfarlane 3 corrugated facilities - 1.1m
• UK Paper
• Hull waste paper collection depot - 1.1m
• BPB Recycling 5 waste paper collection depots
  subject to OFT approval (post year end)
• Plastic Packaging
• Rapak Asia Pacific remaining 50 - 5.3m
• Rapak USA deferred consideration - 8.5m

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Paper and Corrugated Packaging

1 before associates, exceptional items and
amortisation of intangibles 2 monthly
average
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Plastic Packaging

1 before associates, exceptional items and
amortisation of intangibles 2 monthly
average
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Office Products Wholesaling

1 before associates, exceptional items and
amortisation of intangibles 2 monthly
average
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Office Products Manufacturing

1 before associates, exceptional items and
amortisation of intangibles 2 monthly
average
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DS Smith Group

1 before associates, exceptional items and
amortisation of intangibles 2 monthly
average
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Group Balance Sheet
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Pension Scheme Contributions and SSAP24 PL
effects

• In 2003/04 company contributed 10m to Scheme
• Shown as pre-payment no PL impact (SSAP24)
• 10m annual cash contributions continue in
  2004/05
• 2003/04 net nil cost 10m SSAP24 PL credit from
  historic surplus offsets 10m normal cost
• Reverses in 2004/05 with net SSAP24 pension
  charge following triennial valuation see
  Guidance

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Pension SchemeFRS17
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Free Cash Flow
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Net Cash Flow
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Borrowings Movements
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Guidance

• Tax rate up from 27 to circa 31
• Cash capital expenditure below depreciation
• 2004/05 SSAP24 pension charge anticipated to be
  in mid-teens
• 10m normal cost
• 1.5m amortisation of pre-payment
• amortisation of any scheme deficit
• Pension charge allocation to segments
  
• Paper Corrugated 62
  
• Plastic Packaging 13
  
• Wholesaling 16
  
• Manufacturing 9

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Guidance (cont.)

• Delay in achieving LINPAC Containers synergies
  pending Competition Commission ruling
• Interest charge up - higher average borrowings
  following the LINPAC Containers acquisition
• Number of shares in issue average 2003/04
  348.2m year end 2003/04 387.3m

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Recap

• Creditable result despite tough markets
• Maintained good return on capital employed -
  above cost of capital
• Delivered a healthy cash flow after dividends
• Retained a strong balance sheet following LINPAC
  Containers acquisition
• Gearing interest cover net debt/EBITDA
• Good financial platform for further growth

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Operational and Strategic Development

• Tony Thorne
• Group Chief Executive

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StrategyImprove and Develop

• Paper and Corrugated Packaging
• Reinforce UK position
• Develop continental European positions
• Plastic Packaging - growing in our two focused
  markets
• Spicers - building our continental European
  positions strengthening our major UK and French
  businesses

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2003/04 Priorities(as shown at 2003 Prelims)

• Paper - manage the down cycle
• Corrugated - further improvement
• Liquid packaging and dispensing - benefits from
  investment
• Spicers - maintain momentum
• Continue drive on ROCE
• Cash generation

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Paper and Corrugated PackagingPaper

• Market margin squeeze demand weak
• CCM price erosion until late 2003
• Higher input costs net raw material energy
• DS Smith significantly lower profits
• Raised prices March 2004, now some push back
• Maintained UK share grew exports
• Improved productivity
• Developed recycling operations

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Paper and Corrugated PackagingCorrugated

• Market
• Demand UK -0.9 Europe 0.5, Poland, Turkey
  stronger
• Price pressure
• DS Smith strong advance
• UK speciality up sheet feeding squeezed
• France excellent result
• Italy further growth
• Poland higher added value
• Turkey major improvement
• Prices now under threat

Source European Federation of Corrugated Board
Manufacturers 2003
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LINPAC Containers

• Acquired 22 March 2004
• Integration awaits Competition Commission inquiry
• Quality of the opportunity confirmed
• Results are affected by paper cost increase

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Plastic Packaging

• Liquid packaging and dispensing
• Overall sales growth
• European bag-in-box strong
• Tap sales and margins down
• Returnable transit packaging
• Sales and profits well ahead
• Crates strong performance product innovation
  new contracts
• Extruded products demand patchy better
  efficiencies
• Other businesses held the result back

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Office Products Wholesaling

• Market continued soft demand signs of
  stabilisation
• Volumes lower
• Customers buying lower specification products
• Spicers substantial profit improvement
• Leverage European presence better buying
  margins IT
• UK high service levels further cost reduction
• France costs cut margin management
• Germany steady growth H2 traded around
  break-even
• Spain strong sales growth
• Italy launching November 2004

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Office Products Manufacturing

• Market
• Brands lower sales
• Imports price pressure
• DS Smith
• Costs reduced further
• Sales development

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2004/05 Outlook and Priorities

• Environment
• Pension charge LINPAC
• Paper and Corrugated pricing
• Priorities
• Plastic Packaging - renewed profit growth
• Spicers - continued progress
• Paper and Corrugated Packaging
• LINPAC, DS Smith driven separately
• Cost reduction
• ROCE and cash flow - continued emphasis
• Challenging year ahead

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APPENDIX
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Turnover by Segment
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Operating Profit by Segment
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Return on Sales by Segment
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Return on Capital Employed by Segment
Period operating profit monthly average capital
employed. Capital employed includes goodwill.