Financial Highlights

• Underlying revenue1 up 1% to £110.0 million (2004: £109.0 million)
• Strong growth of EBITA2, up 42% to £23.8 million (2004: £16.8 million)
• EBITA margin2 22% (2004: 22%)
• Adjusted basic earnings per share2 up 43% to 12.05p (2004: 8.41p)
• Total dividend increased by 10% to 5.07p per share (2004: 4.61p)

Statutory Results

• Revenue £110.0 million (2004: £76.4 million)3
• EBITA £23.3 million (2004: £2.5 million)3
• Operating Profit £22.7 million (2004: £2.0 million)3
• Profit before tax £21.2 million (2004: £0.5 million)3
• Basic earnings per share 11.82p (2004 loss per share: 1.17p)3

Operating Highlights

• Key executive appointments, including CEO Bill Emhiser, completed
• Strengthened Board
• Recovery in sales in second half of year
• Higher than initially forecast synergies from Schleicher & Schuell acquisition
  • achieved ahead of schedule
  • at lower cost
• 11% rise in Q1 sales heralds positive outlook for the year

1at constant exchange rates, including pro-forma S&S revenue for the full prior year,
excluding Biometra
2before integration costs and provisions
32004 results are stated under IFRS

Commenting on the results, Bob Thian, Chairman, said:

“Despite disappointing sales growth in 2005, we have seen substantial growth in profits and earnings at Whatman, driven primarily by the higher than expected synergies from the acquisition of Schleicher & Schuell in Germany which has proved to be an outstandingly successful addition to the Group.

“The current year has started well under the new management team, with the top line growth that we have been seeking now coming through. I am confident that we shall resume our outperformance this year and beyond.”

Enquiries:
Whatman Plc	Today Tel:	020 7831 3113
Bob Thian, Chairman	Thereafter:	020 7581 0788
Financial Dynamics	Tel:	020 7831 3113
David Yates / Anna Keeble

A presentation and conference call for analysts will be held at Financial Dynamics at 9.00am today (3rd April).
Please call Mo Noonan for details on 020 7269 7116.

Chairman’s Statement

Overview

Following a weak first half of 2005, actions to re-focus and re-energise sales and marketing programmes brought some recovery in the second half and we have experienced a healthy first quarter of 2006, increasing our confidence for a recovery from a difficult year in 2005.

Over the year as a whole, sales were disappointing across all three business segments. This was due in part to legacy organisational and management issues from the change of CEO, and in part to supply chain disruption and backorders resulting from the final phase of our factory restructuring programme. Both these issues have been overcome: our senior management team is up and running and we will have reached our goal of four manufacturing plants (down from 21) during 2006.

The integration of S&S and Whatman has been substantially completed ahead of schedule, cost savings are higher than originally projected and the costs of restructuring well below initial estimates.

Product line rationalisation and price alignment of the two companies’ product ranges was completed in the third quarter of the year. The revised pricing has still to work fully through the distribution channel, but indications are that the price effect will more than compensate for the expected loss of volume.

Encouragingly, like for like sales in the second half of 2005 were 7% higher than in the first half, sales in the first quarter of 2006 were 11% higher than in Q1 2005, and the order book entering the second quarter of 2006 is strong.

Financial Results

The statutory results have been prepared in accordance with International Financial Reporting Standards, including a restatement of prior year results and treating Biometra GmbH (in liquidation) as a discontinued operation. Details of adjustments to the 2004 results were set out in an announcement dated 1 September 2005.

Excluding Biometra, revenue totalled £110.0 million (2004: £76.4 million); on a like for like basis, i.e. at constant exchange rates and including pro-forma S&S revenue for the full prior year, this represented a 1% increase over 2004.

Like for like* half year revenues were:

(* “like for like” means at constant exchange rates and including pro-forma S&S revenue for the full year of 2004)

Profit before tax was £21.2 million (2004: £0.5 million) and EBITA was £23.3 million (2004: £2.5 million).

EBITA, excluding integration costs and provisions, was £23.8 million, up 42% on 2004. EBITA margin, on the same basis, was 22% (2004: 22%).

Segmental results, before integration costs and provisions, were:

EBITA:

EBITA margin:

To illustrate the Group’s progress over a longer period, EBITA and EBITA margin excluding exceptional costs, integration costs and provisions, over recent years has been:

Pre-acquisition, S&S generated only single digit operating margin. Pre-tax synergy savings arising from the S&S acquisition totalled £6.8 million in 2005, compared to the original estimate of £4.1 million. These savings enabled the enlarged Group to return rapidly to the pre-acquisition Whatman margins.

During the year, £7.2 million of provisions were utilised. A further £3.0 million of provisions were released to the income statement, offset by £3.5 million of acquisition integration costs. At the year end, a further £4.4 million of provisions remained to be utilised.

The Group incurred a tax rate of 28%, in line with previous indications that the pre-acquisition business would continue to bear a rate of about 25% with new business taxed at about 35%.

Earnings per share were 11.82p (2004: loss per share 1.17p). Earnings per share before integration costs and provisions were 12.05p per share, 43% higher than in 2004 (8.41p per share).

Operating cash flow in the year was £11.1 million (2004: £8.7 million).

Working capital as a percentage of revenue increased during the year to 26% (2004: 23%), partly as a result of a temporary increase in stock in response to manufacturing and customer services issues referred to in the Operations section below and partly as a result of payment of deferred consideration relating to the S&S acquisition.

At the end of the year, the Group’s net debt was £35.9 million (31 December 2004: £30.3 million), with interest cover of 13 times (2004: 4 times).

Dividend

Despite the disappointing top line performance, the Group’s profitability has shown satisfactory improvement during the year. The Board is confident that 2006 will see a return to sales growth and there is further earnings accretion to come from the S&S acquisition. Accordingly, the Board has decided to recommend the payment of a final dividend for the year of 3.16p per share, making a total dividend for the year of 5.07p, 10% higher than in 2004 (4.61p). This will be paid on 2 June 2006 to shareholders on the register at 5 May 2006.

Operations

The merging of the Whatman and S&S product ranges was completed in the third quarter of the year. The combined product range comprises 7,300 line items down from a total of circa 43,000 items before commencement of the Whatman and S&S product rationalisation programmes.

The combined range is now sold under a dual Whatman - Schleicher & Schuell brand, maximising the different territorial strengths of the individual brand names. For the key German market, the alignment of prices of ex-S&S products with Whatman price levels became effective on 1 August. Although the impacts of the product rationalisation and realignment of prices have not yet fully worked through the distribution channel, we expect that the loss of volume will be more than offset by the effect of increased prices.

Integration of the Whatman and S&S customer service, sales and business development groups was completed in the first quarter of the year:

• new customer service teams are now well established at Florham Park, New Jersey (serving North America), Maidstone, UK (South Europe), Dassel, Germany (serving North Europe and a new Export team), Singapore (Asia Pacific) and Tokyo (Japan)
• merged sales teams are also now well established and trained to promote the consolidated product range.

While the implementation of this reorganisation of business development and sales resources resulted in some disruption to customer relationships and consequent shortfall in sales in the first half of 2005, the combined teams now provide increased marketing and selling resources to support a comprehensive product offering for the life sciences market place.

In addition, business development and sales management has been substantially strengthened by five new vice president appointments during the year.

Relocations of the two US production facilities of S&S from Riviera Beach, Florida and Keene, New Hampshire to Sanford, Maine were completed in April and July, respectively.

Sanford is now a manufacturing and R&D centre of excellence, registered to ISO9001 and with the FDA for manufacture of medical devices, with world class capabilities in protein microarray and FTA technologies, and in the fabrication and encapsulation of a broad range of membranes. In addition, in order to address a major opportunity in QC testing for the beverage industry we are investing in new tooling and automation for the manufacture of products for microbiology testing at the Sanford facility.

We have also invested in new equipment for paper conversion at Banbury and Dassel. At Banbury, the majority of our cellulose media grades are now produced on fully automated equipment with in-line quality monitoring. The automation of the conversion of glass media grades, also at Banbury, will be completed during the first half of 2006, yielding further quality and cost improvements. At Dassel, we are specialising in the production of folded paper products.

Relocation of the remaining small membrane facilities, from Toronto and Gerbershausen to Dassel, and from Belgium to Sanford, are on schedule to be completed during 2006.

The initial stage of the upgrading of the integrated manufacturing software system was completed in the third quarter of 2005. Further stages, to be implemented during 2006, will include extension of the system to include Dassel manufacturing operations and worldwide logistics operations.

Substantial progress in the disposal of surplus properties has been achieved. Sales of the former Group headquarters at Maidstone and of the former US headquarters in New Jersey were completed in August and November, respectively, generating £5.0m of cash. A contract for the sale of the former S&S facility at Keene, New Hampshire, was signed in March 2006, with completion scheduled for June. The lease of the former S&S facility in Florida was surrendered in April 2005. The leases at Louvain, Belgium, and Toronto will both be surrendered in April 2006. A former distribution warehouse in Maidstone has been sublet from March 2006.

The sale of a very small non-core activity, the GenXTrak DNA extraction service business, was completed in February 2006. The business had revenues of £0.1m in 2005.

Headcount in the combined Group at the end of 2005 was 988, reduced from 1170 at the time of the S&S acquisition, the major part of this reduction coming from synergies at the manufacturing operations level, while maintaining full strength at the customer facing levels of sales and sales support.

Segmental Review

The consolidated income statement and the segmental analysis in the notes to the accounts include a full year of S&S revenue in 2005 but only one post-acquisition month of S&S revenue in 2004. The analysis in the following table provides a like for like comparison against unaudited pro-forma 2004 revenue of the enlarged Group.

* at constant exchange rates

LabSciences

Total sales on a like for like basis to the LabSciences sector were flat, in a market which is growing at about 4%. Sales in North America and most European markets were down on 2004. The German market showed some growth, though partly as a result of customers buying last-makes of discontinued products. Sales in the smaller Asian markets grew around 4%.

Sales of the traditional product groups, cellulose and glass fibre macrofiltration products and chromatography, dropped over 2% in a broadly flat market as a result of the combination of factors outlined earlier in this statement.

Continuing changes in the laboratory distribution channel caused some uncertainty during the year, but the combined Whatman – S&S product offering will enable the Group to enhance its position as preferred supplier to the specialist laboratory distributors.

The Group’s range of membranes and particularly membrane devices continue to find growing LabSciences applications, for example in pharmaceutical testing and analysis and in ground water analysis, achieving growth of nearly 9% in the year.

A significant new market opportunity in QC testing for soft drinks bottlers enabled the ex-S&S microbiology analysis filters to grow by 5%, with prospects for very substantial further growth.

Recently introduced products achieved continuing growth:-

• mini-uniprep syringe-less filter sales increased by 14%, with further growth to come from an expanded product range, including slit septa mini-uniprep for high throughput applications and amber mini-uniprep which enables samples to be protected from u.v. light
• sales of purasil, a high purity silica gel for use in flash chromatography purification, increased by 19%.

BioScience

Like for like sales to the BioScience sector showed marginal growth.

Multiwells continued to disappoint, with sales falling 9%, partly as a result of difficulties in the supply of raw materials.

Total FTA sales were flat as initial deliveries under a new long term contract with the French Police were delayed to the first quarter of 2006 due to a problem sourcing some bought-in components. However FTA sales in the key North American market were more encouraging with 41% growth over 2004 and the FTA based Easyclone 384 well microplate achieved first sales in the second half of the year.

Development of FTA Elute which enables access into major new markets (described in the Product Development section below) has prompted a re-evaluation of the total FTA opportunity. The results of this re-evaluation will be published in the Interim Statement.

Sales of 903 neonatal PKU test cards grew by 20%, as an increasing number of countries implemented newborn screening programmes.

Blotting membranes achieved higher sales both to OEM users and through distributors.

Commercialisation of the protein microarray technology is progressing well, with sales of £1.0 million in the year, creating a strong base for future growth.

MedTech

Like for like MedTech sales increased by 4% with both North America and Europe showing growth. Membranes for clinical diagnostics grew by over 8% while cellulose and glass filtration media for diagnostics also found new applications.

Fusion 5, which simplifies lateral flow diagnostic assays, is progressing satisfactorily through the regulatory approvals and validation processes of a number of diagnostics manufacturers. Sales are expected to accelerate as our customers move towards their product launches during 2006.

Biometra

Biometra sales increased by 2%. Little substantive progress was made toward settlement of its intellectual property disputes and provision for the full net asset value of this business continues, pending resolution of these disputes.

We expect to resolve the issues affecting Biometra within the next twelve months.

Product Development

A major extension of the Group’s FTA technology, FTA Elute, was developed during 2005 and is being launched in various formats through the first half of 2006. FTA Elute combines the established FTA characteristics of a one-stop shop for collection, purification and room temperature storage of DNA, with a capability for simple water elution, enabling a quantified elution of DNA for multiple PCR reactions and downstream analysis. This new product addresses significant new market opportunities for FTA in the areas of biobanking, molecular diagnostics and pharmacogenomics. The suitability of FTA Elute in the biobanking market was endorsed by the UK Biobank’s validation of the product in their project protocols.

Two significant developments of the protein microarray technology acquired with the S&S business are now in early stages of commercialisation:

• The Combichip autoimmune array rapidly measures the presence of autoantibodies to various autoantigens associated with autoimmune diseases, enabling better diagnosis of such diseases. CE validation is expected to be completed in the first half of 2006
• A 96 well format of FAST slides, taking the technology into high throughput formats, will be launched in the second half of 2006.

Product line extensions completed during 2005 include:

• a low extractable GDX filter for pharmaceutical applications and a turbo GDX filter for applications involving particulate–rich suspensions
• a needleless drug transfer device to replace filter spikes used in medical applications
• a non-extractable mini-uniprep for use in harsh chemical extractions.

Board and Staff

Bill Emhiser joined us in November as Chief Executive Officer. He has outstanding experience in our industry and is already bringing a stronger focus to sales and marketing activities. With Bill on board, I have reverted to a non-executive Chairman’s role with continuing involvement in investor relations and direct responsibility for the strategic development of the Group, especially M&A activity.

We are very fortunate that David Evans and Alan Wood have joined the Board as non-executive directors. Both bring a wealth of very relevant expertise and experience.

At senior and middle management levels, we now have a strong mix of well-qualified new appointments and experienced Whatman and ex-S&S managers.

It is also encouraging that our colleagues who joined the Group from S&S have so willingly responded to new challenges, and I would like again to thank all of our staff for their continuing commitment to the Group.

Outlook

Whilst overall sales performance in 2005 was weak, the second half was considerably better than the first, and this improvement has accelerated through the early part of 2006 with like for like sales in the first quarter up 11% and a strong order book entering the second quarter of 2006.

The operational issues underlying much of last year’s setback have been overcome. Consolidation of all major manufacturing facilities is now reaching completion, enabling high quality, cost-efficient production, with further improvements to come from continuing capital investment.

Merged business development and sales organisations are fully operational. Customer service levels continue to improve.

An experienced board and a full complement of senior management give us the capability of growing your company well ahead of the market.

I am therefore confident that we will resume our outperformance this year with a goal of double digit revenue growth beyond 2006. 

Bob Thian
Chairman
3 April 2006