As highlighted in our interim report, the economic environment is challenging but overall Group sales were slightly up on the previous year (which included six months sales following the acquisition of Sifam Instruments Limited). On a like for like basis we have experienced a sales decrease of 9%.

The Group has however been helped by the actions taken to realign the cost base (details of which are described below) and falls in the value of sterling and commodities which have resulted in an un-audited increase in operating profits (pre exceptional items) somewhat above market expectations.

The group is continuing its policy of reducing its cost base coupled with selective investment in areas that show potential for growth or productivity improvement.

-We shall postpone appointing a new group CEO. Keith Daley is currently acting as Executive Chairman supported by divisional management.

-The group IT project is, however, continuing and Howle will be the first subsidiary to go live. This project, when complete, will greatly enhance management productivity

-This division has reduced headcount from almost 1,000 in January 2008 to just over 700 following the completion of manufacturing transfer to China and response to trading conditions. This has resulted in an exceptional charge of £1 million but a significantly reduced cost base.

-In addition to the above we are temporarily laying off Tunisia employees where work is not available without incurring redundancy cost. This is another advantage of operating in a low cost country.

-ECD is continuing its commitment to develop new products and expects these to make a tangible contribution in the current financial year. The division intends to build design capability in China and the first engineers there have already been recruited

-The sales force is being aligned with global demand, which will result in a greater focus on Asia and the Americas.

- A project is in hand to reduce intra division logistics costs as a result of the division operating from three manufacturing sites.

-The Company is focussing on specific industrial sectors (e.g. Oil and Gas) and a much greater emphasis on overseas sales. The Company has hitherto lacked such focus.

-HMD is continuing its policy of selective investment in plant to increase productivity and reduce bottlenecks in value added areas. In 2008/9 investment authorised was £0.9 million.

-The division has announced the closure of its Tenbury Wells facility and will consolidate its Tungsten Carbide operation at Princes Risborough in order to save costs.

- These actions have resulted in an exceptional charge of £0.9 million and a significantly reduced cost base.

-The division is examining a number of initiatives to reduce manufacturing costs by offshoring including the transfer of control knob manufacturing to China as already announced.

-During 2008/9 the UK workforce has been reduced by 20% to 113 people. These actions have resulted in an exceptional charge of £0.5 million but a significantly reduced cost base.

Since the purchase of our stake in this company, the company has reported a deteriorating financial position. In addition conditions in the stock market have led to a lower valuation being placed on Hartest. We therefore intend to write down the value of the stake in our accounts at year-end to reflect its market value, which will result in an exceptional charge of £1.0 million.

Following its trading update issued on 19 February 2009 we have requisitioned a general meeting of Hartest with resolutions to remove two of its non-executive directors. We believe that the cost and number of board members are out of proportion to the size of the company.

As at 20 February 2009 banking headroom (comprising cash balances plus undrawn invoice discounting facilities but excluding acquisition facilities subject to preconditions) amounted to £1.7 million.

The outlook is extremely difficult to predict in the current economic environment, but at present we expect the current year sales to be down by around 15% on last year with the re-alignment of the cost base helping to mitigate the effects of the recession so that the Group remains profitable.

This year will continue to be challenging but economic turbulence may provide further opportunities for growth through acquisition.

There is, however, little or no visibility in our markets and we are continually re-testing our assumptions and re-assessing the cost base. We shall provide a further outlook update when our annual results are announced towards the end of May.

This announcement contains certain forward-looking statements that have been made by the Directors in good faith using information available up until the date they approved the statement. Forward-looking statements should be regarded with caution as by their nature such statements involve risk and uncertainties relating to events and circumstances that may occur in the future. Actual results may differ from those expressed in such statements, depending on the outcome of these uncertain future events.