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CHAIRMAN’S STATEMENT

Sales for the year were £29.626m., 4% below the previous year.

The profit before tax was £1.623m., which compares with £3.351m. in the previous year, a decline of 52%.

Basic earnings per share were 9.63p, which compares with 23.18p (restated) in the previous year.

The Board is recommending a final dividend of 9.95p bringing the total to 13.25p for the year. This is unchanged from 2000.

The year has been badly affected by two external influences. In the UK, sales were adversely affected in the first half by a reduction in the number of overseas visitors due to the foot and mouth epidemic. Sales in the USA, which previously accounted for 44% of total Group sales,were adversely affected by the major destocking programme undertaken by our major department store customers. As a result Group sales at the half-year were 9% down on the previous year.

After a slow first half, we were then badly affected by the events of 11th September, as were many companies in the industry. Despite this, there was a steady and sustained recovery in the second half, led by strong sales growth in the UK and the Far East. Overall second half sales were 1% above the same period last year so that the sales shortfall for the year was reduced to 4% compared to the previous year.

Annual sales in the USA fell by 12%, but this was offset by a commendable increase in the UK of 5%. Our strategy of developing the Far East market is also now showing rewards, with sales 49% above the previous year. Clearly we have the opportunity for further substantial growth in this area and our long-term commitment to achieve this is demonstrated by the establishment of our subsidiary, Portmeirion Japan.

Complementing the second half sales improvement, the manufacturing gross profit margin for the second half was an impressive 2 percentage points better than that for the first half, and I believe this improvement will be maintained.

These underlying improvements have continued into the New Year and, given the strength of our balance sheet, the Board feels justified in maintaining the dividend.

The events of last year have not in any way diminished our commitment to the Group’s product strategy. The diversification into associated home-ware and gift products under the Portmeirion Brand, together with new and innovative ceramic ranges, continues. We introduced the revolutionary Starfire range into our gift offer in the autumn, and new ranges will be introduced during this year to sustain our growing reputation for creative design. We are now firmly established in the glassware, home textiles and candle markets, with combined sales of £3.1m. The Board will consider acquisitions as a way of increasing market share in any of these markets if suitable opportunities can be identified.

Emphasis on excellent design and quality has enabled the Group to continue to produce its ceramic ranges in Stoke-on-Trent. The constant drive for improved efficiency and productivity is never ending, and will be backed by capital expenditure focused on our ceramic manufacturing plants.

The whole management team and workforce, now under the leadership of Lawrence Bryan, Chief Executive Officer, have responded magnificently to the challenges that were imposed upon the Group in 2001. The team in our New York office showed remarkable fortitude in getting back to business during September. I would like to thank everyone for their contribution and I have every confidence in their ability to continue the Group’s successful development.

Given the economic uncertainties with which we are faced, I believe it is appropriate to be cautious about the prospects for 2002. However, we have started the year with sales continuing to improve, and a cost base that takes account of those economic uncertainties.

Given a steady improvement in the USA market, now that the major retailers have largely finished de-stocking, I expect a reasonable recovery in Group prospects this year.

Arthur Ralley
Chairman
15th March 2002

FINANCIAL HIGHLIGHTS

	2001 £000’s	2000 £000’s	Decrease
Turnover	29,626	30,727	3.6%
Pre-Tax Profit	1,623	3,351	51.6%
Earnings per share – Basic	9.63p	23.18p*	58.5%
Dividends per share	13.25p	13.25p	-
*restated