Highlights

• Profit before goodwill amortisation and taxation of£20.3m (2001 - £28.8m before exceptionals)
• FRS 3 profit before tax of £15.8m (2001 - loss before taxof £7.4m)
• Earnings per share of 4.4p (2001 - 6.2p) based on the profitbefore goodwill amortisation (and in 2001 exceptional items) less anotional 30 per cent tax charge
• Interim dividend maintained at 0.62p per share
• Positive free cashflow in the first half
• US continues to outperform in competitive markets
• New UK product-focussed structure now firmly established anddelivering benefits

Chief executive George Burnettsaid :

"Against a background of challenging economic conditions, the Groupgenerated a profit before goodwill amortisation and tax of£20.3m in the 6 months to 31 October 2002. In the same periodin the previous year when conditions pre September 11 were morefavourable, the figure was a profit of £28.8m beforeexceptional items. Although revenues fell 5.9% to £292.2m(£310.6m) all but 1.5% of this decline was due to translationeffects resulting from the weak dollar."

"The Board recognises the importance of dividends to shareholdersat a time when stock markets are weak and has declared an unchangedinterim dividend of 0.62p. Bank debt at 31 October 2002 at£431.2m is c£100m lower than the equivalent figure ayear earlier reflecting the successful implementation of theaccounts receivable securitisation, a favourable currencytranslation effect and positive free cashflow."

"Overall, while the Board believes a continued cautious approach isappropriate in current conditions, it is confident of the Group'sability to continue to reduce debt levels. The Group's divisionsare all leaders in their respective markets and are well positionedto benefit substantially as and when economic conditions,particularly in the United States, improve."

OVERVIEW
Against a background of challengingeconomic conditions, the Group generated a profit before goodwillamortisation and tax of £20.3m in the 6 months to 31 October2002. In the same period in the previous year when conditions preSeptember 11 were more favourable, the figure was a profit of£28.8m before exceptional items. Although revenues fell to£292.2m (£310.6m) all but 1.5% of this decline was dueto translation effects resulting from the weak dollar.

FRS 3 profits before tax of £15.8m compared favourably withthe loss of £7.4m in the same period a year ago. Earnings pershare based on the profit before goodwill amortisation (and in 2001exceptional items) less a notional 30% tax charge were 4.4p (20016.2p). The Board recognises the importance of dividends toshareholders at a time when stock markets are weak and has declaredan unchanged interim dividend of 0.62p which will be paid on 7April 2003 to shareholders on the register on 28 February 2003.Bank debt at 31 October 2002 at £431.2m is c£100m lowerthan the equivalent figure a year earlier reflecting the successfulimplementation of the accounts receivable securitisation, afavourable currency translation effect and positive freecashflow."

US - SUNBELT
In the six-month period Sunbelt's revenues rose 0.8% to $292.4m($290.1). A decline in same store revenues, of 4% year on year, wasoffset by turnover from new businesses opened in the last 18months, 23 in the year to 30 April 2002 and 4 in the six months to31 October 2002. This modest growth in dollar revenues was achievedat a time when non-residential construction spending, according toUS Department of Commerce figures, declined 17% year on year and byas much as 30% in the period March 2001 to September 2002. However,the weakness of the dollar meant that, when translated intosterling, revenues declined by 5.8% from £201.8m to£190.0m.

For the same reason, Sunbelt's operating profit before goodwillamortisation declined by 20% in sterling terms but by 14.5% in USdollars. Since equipment utilisation levels were broadly sustainedat last year's levels, the decline in operating profit largelyarose from pressure on rental rates in the current US economicslowdown and the drag effect of the 27 businesses opened in thelast 18 months. Our specialist scaffolding and pump and powerbusinesses in particular continue to take market share,contributing to a performance which, while declining year on year,compares favourably with Sunbelt's US peer group.

In response to the economic climate, capital expenditure levelswere reduced by a third to £33.9m (£50.8m) of which£18.0m was spent on expanding the fleet and the balance onreplacement. The average age of the US fleet overall is 3 years 9months, and only 3 years when aerial work platforms, which have alonger than average working life, are excluded. Since these figuresare at the very least commensurate with those of Sunbelt'scompetitors and low compared with the working life of theequipment, our recent policy of matching expenditure to economicconditions can be continued for some time without detriment toSunbelt's competitive position.

UK - A-PLANT
In the six months under reviewsignificant changes were made in the operating structure of theA-Plant business following the appointment of new senior managementat the end of the last financial year. From the beginning of theperiod the specialist businesses, such as portable accommodation,power generation, welding, rail maintenance and powered access,took on a national role under a single operating division. Thebenefits of this approach are already apparent in terms ofperformance and increased customer awareness. The refocusing of thesmaller equipment businesses through the roll-out of the "Tool HireShops" brand was achieved on schedule. Where those smallerbusinesses had become 'mini A-Plants' their larger equipment wasredistributed to plant hire locations and capital expenditureconcentrated on tool hire activities.

Following this process, from 1 December 2002, the 73 Tool HireShops have been brought together, like the Specialists, as aseparate national division to ensure optimum operational andmarketing impact. At the same time the remaining A-Plantbusinesses, 92 in total, were grouped into two operating divisions,A-Plant North and South. Finally the Irish business, which hadsuffered a significant downturn in the year to 30 April 2002, hasmade good progress under its new all-Ireland identity.

Since 1 May 2002 the functions of the four previously separateaccounting offices and the marketing and corporate office ofA-Plant have been transferred to a new location at Warrington, andthe four computer systems have been merged, following a similarprocess in Sunbelt last year. This rationalisation willsignificantly improve operating efficiency, customer support andinternal and external communications and will also enable supportcosts to be reduced once the new systems are fully bedded down.Resulting from the focus given by its new product driven structure,A-Plant anticipates closing a small number of locations in thesecond half in markets where it is either geographicallyover-represented or in product lines where its market presence isinsufficiently strong to achieve its return on investment criteria.Rental equipment released from these locations will be mostlyutilised elsewhere in the business where better returns can beobtained.

The previously announced supplier rationalisation programme hasmade good progress with a reduction in the number of suppliers from10,000 to 2,500 already achieved with the anticipated savings fromthis exercise expected to exceed £1m in a full year. Thus,although A-Plant's turnover fell by £5.3m to £95.1m andits operating profit before goodwill amortisation and, in 2001,exceptional items by £2.4m to £9.7m, much has been doneto reverse the decline suffered by the business in the second halfof last year. Indeed in December A-Plant's monthly revenues (forthe first time this year) exceeded those of the previous year. Witha continued focus on improving the rate of return on investment,capital expenditure was kept under tight control at £15.0m(£19.6m) thereby increasing utilisation rates and increasingthe average age of the rental fleet to 3 years 9 months, whichcompares with a working life on average of more than 8 years.

OFFSHORE AND ENVIRONMENTAL - ASHTEADTECHNOLOGY
A strong performance in AshteadTechnology's environmental businesses in the United States andCanada despite the slow-down in the US economy was insufficient tooffset difficult trading conditions in the Company's oil and gasmarkets in the North Sea and the Gulf of Mexico. As a resultturnover fell £1.3m to £7.1m and operating profitsbefore goodwill amortisation by £0.9m to £2.1m.Operating margins, however, remain the highest in the Group at29.6%.

CASH MANAGEMENT
Total rental fleet capitalexpenditure committed in the period was £51.2m (£73.2m)split almost equally between equipment for expansion andreplacement items. There was a gain of £2.2m on sale of fixedassets. Debtors days at 31 October 2002 were reduced to 56 days(2001 - 57 days). Net cash inflow from operating activities was£152.9m (£121.8m) and free cash flow (defined as cashinflow from operating activities less interest other thanexceptional interest, dividends, tax and capital expenditure) was£60.6m (outflow of £35.0m). Both these figures includethe initial proceeds from the first drawdown of the accountsreceivable securitisation in June 2002 of £57.4m. Thecontinued control of capital expenditure will result in increasedfree cash flow in the second half and beyond. Actual tax paymentswere £0.4m and will remain minimal for the foreseeablefuture.

CURRENT TRADING AND OUTLOOK
Trading in November and December has continued to show the sametrends seen in the first half with group revenues for the eightmonths to 31 December 2002 1.4% lower than the previous year atconstant rates of exchange.

Looking forward, the major influence on trading will be the USeconomy which continues to give mixed signals. The December USInstitute of Supply Management survey indicated that 70% ofmanufacturers and service companies expect sales in 2003 to exceed2002 levels. The year on year rate of decline in non-residentialconstruction reduced to 14% in November and more importantly theabsolute level of activity rose by 1.4% between September andNovember. President Bush is introducing a significant package ofmeasures to stimulate the US economy. On the other hand,geopolitical risks and a high oil price threaten the generaleconomic outlook.

Sunbelt's absolute progress will be determined by the resolution ofthese matters, but the Board is confident that its comparativeposition as number four in the US with only a 2.5% to 3% marketshare will continue to strengthen. In the UK others in our industryhave observed that the market in which we operate has worsened overthe last 12 months. Nevertheless the Board is confident that themeasures being taken in A-Plant are set to deliver an improved yearon year performance in the second half. Overall, while the Boardbelieves a continued cautious approach is appropriate in currentconditions, it is confident of the Group's ability to continue toreduce debt levels. The Group's divisions are all leaders in theirrespective markets and are well positioned to benefit substantiallyas and when economic conditions, particularly in the United States,improve.