IVS Inveresk

RNS Number:0214Y
Inveresk PLC
27 April 2004


                                  Inveresk Plc

                    Trading Update - Annual General Meeting

     
1.   General

1.1  Shareholders will appreciate that since the approval of the company's
restructuring at this time last year (EGM - 30 April 2003) and the dark days
during the last few weeks of 2002 when the new management team was put in place
significant progress has been achieved with the rehabilitation programme now
fully completed.

1.2  This is reflected in the significantly stronger balance sheet at 31
December 2003, the reduction in creditors and short term debt as well as the
restoration of both profits and dividend payments after a number of years of
sustained losses.


2.   Current trading

2.1  Last year (2003) was a year of two halves during which the strong
trading in the first six months gave way to weaker demand patterns in the second
half of the year due in the main to economic recession in Europe and customer
destocking. This year (2004) is likely to be similar but by way of role reversal
weaker during the first six months with a predicted stronger second half of the
year to follow. On a direct comparison with last year we are trading somewhat
behind 2003 levels albeit to a large extent due to adverse currency influences
(US $ and Euro) and the depressed economic climate which continues to prevail in
a number of key European markets where the company enjoys significant sales
presence. In particular variable demand has been experienced at St Cuthberts
Mill in the field of pre-impregnated resin based papers for the specialised
decor and furniture sectors in which we remain a major worldwide player.

2.2  However, on the positive side, progress appears to have been made in
terms of new product innovation and penetrating new markets. For example, at
Carrongrove customers have warmly received the new products launched within the
Gemini range including INVERX and Superfine SBS boards. At the same time the
Mill's core product line of two sided coated boards has been trialled and
approved in the Eastern seaboard of the United States. Orders have now been
received albeit some three to four months later than expected. This initiative
is likely to improve volumes at Carrongrove and will impact positively in the
second half of the year and beyond.

2.3  At St Cuthberts a complete new range of technically sophisticated
partially pre-impregnated resin based papers has been developed and
enthusiastically received by customers throughout Europe, the United States and
Canada. These papers have been developed in response to specific customer
requirements to offer a range of decor products with split resistant qualities
at a competitive price. The management team at St Cuthberts remains confident
that significant volume increases will flow from this exciting initiative.
Volume offtake of artist papers and laser ink jet remains satisfactory.

2.4  As ever in this highly challenging and competitive industry margins
remain under pressure mainly due to the real reduction in pulp prices arising
from the general weakness of the US dollar. In addition not all raw material and
energy price increases can be passed on to our customers.

2.5  This of course places an important duty on management to regularly
review the underlying fixed cost base within the company but with specific
reference to the two mills at Carrongrove and St Cuthberts. This review is
ongoing and is being vigorously pursued.

2.6  The company has taken action to control its exposure to currency
influences by buying forward a proportion of its pulp requirements for the rest
of the year and matching its US $ and Euro revenues against liabilities to
suppliers in the same currencies. We believe that foreign exchange markets will
remain volatile and efforts will continue to be made to minimise the company's
exposure in this important area.


3.   Asset Realisation Programme

3.1  I am pleased to report that the sale of surplus assets is presently
on track. This involves the sale of equipment at the now closed Mill at
Inverkeithing where the largest paper making machine (PM5) has recently been
sold for in excess of #1.7 million, which is at the higher end of market
expectations. Equipment sales will be concluded around 30 June 2004 with
proceeds being applied to Bank debt as your Board of Directors remains committed
to the retirement of Bank debt in the short to medium term.

3.2  On the Real Estate side significant interest has been shown by
builders/developers in a reservoir which we placed on the open market earlier
this year. Bids close on 29 April 2004 and are likely to be subject only to
detailed planning permission. In relation to the large site on which the
decommissioned paper mill at Inverkeithing presently stands negotiations are
ongoing and advice is being taken on the extent of the scheme prior to lodging
the appropriate planning application. The property market in the North remains
buoyant at this time.


4.   Corporate Future

Your Board of Directors remains confident about the short to medium term.
Certainly challenges exist for the management teams at both mills where within
their respective areas of expertise in niche markets they enjoy an enviable
reputation. At the centre we are now able to look for the most appropriate
corporate path going forward which will include cooperation agreements,
strategic alliances and mergers and acquisitions if it is in the best interests
of shareholders to become part of a larger European Group. In the meantime as
this review of corporate opportunities continues your Board remains committed to
its policy of seeking a debt free status through the generation of profit and
the sale of assets seen as peripheral to the core business.


For further information, please contact:

Inveresk plc -  0207 240 1234
J A F Walker, Chief Executive
J Bernander, Chairman



                      This information is provided by RNS
            The company news service from the London Stock Exchange

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