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office2office plc

Results Presentation

Year ended 31 December 2004

Important noticeThis presentation is directed at and should be distributed only to the persons of the kind specified in the exemptions contained in articles 19 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001.  Any person in receipt of this document who does not fall within the exemptions referred to above should return this document to Mark Cunningham at office2office plc (“o2o”) immediately and take no other action.

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Highlights

2004 2003 • Revenue £141.8m £125.6m + 12.9%

• Operating profit1 £10.1m £7.7m + 31.3%

• Profit before tax2 £9.4m £6.8m + 38.6%

• Profit after tax2 £6.6m £4.8m + 37.5%

• Earnings per share3 16.6p 12.0p + 38.3%

• Cash inflow4 £7.6m £8.2m - 9.3%

• Dividend 4.2p

1. Operating profit before goodwill amortisation and exceptional costs, but after charging share option costs of £0.2m

2. Profit after tax before goodwill amortisation and exceptional costs, but after charging share option costs of £0.2m

3. Fully diluted earnings per share, after share option costs, but before goodwill amortisation and exceptional costs

4. Cash inflow before financing and dividends, but after payment of exceptional costs

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Business Review

Market Developments

• Strong economy

– key driver of demand

• Public sector purchasing review

– account consolidation

• E-auctions

– opportunities and risks

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Strategy

• Expanding our customer base

• Single-source solution

– product range expansion

– economic customer benefits

– peace-of-mind benefits

• Improving service and efficiency in operations

• Focus on merchandising

• Pan-European positioning

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Merchandising

• Source of competitive advantage

– strong team

– brand selection and management

– responsible for product specification, selection and negotiations

– also responsible for inventory levels

• Strong performance in 2004– savings

– line fill

– stock levels

• Priorities in 2005– further reduce purchase prices

– expand range in niche areas

– develop private label/ new brand range

– global sourcing

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E-commerce

• Customer order analysis:

• Cost-saving benefits

• Key focus for 2005 systems development

2004 2003

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Sales

• 2004 Sales +12.9%

• Highlights

– Retention of broadly same share of NHS Logistics

– New account wins in 2004 include

• Dignity Funeral Group EON UK

• Essex County Council consortium Ford Motor Company

• Grant Thornton Learning & Skills Council

• Manpower Man Group

• Nationwide Ottakars

• Shell West Lothian Council

– £100k+ accounts - wins strongly outweigh losses

– Print sales grew by £1.9m to £4.5m

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Gross Margins

• Strong performance in 2004

2004 2003

32.9% 32.0% + 0.9 %

• Issues impacting gross margins

– Merchandising activity

– Procurement savings

– New-business wins

– Account re-tenders

– Product mix

– Exchange rates

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Results

2004£m

2003£m

Turnover 141.8 125.6 +12.9%

Gross margin % 32.9% 32.0%

Operating profit ¹ 10.3 7.7 +34.1%

Profit before tax ¹ 9.6 6.8 +41.8%

Profit after tax 2 6.6 4.8 +37.5%

Earnings per share (on a pro-forma basis) 1,3 18.5p 12.0p +54.2%

Earnings per share (on a pro-forma basis) 2,3 18.1p 12.0p +50.8%1. Before goodwill amortisation, share option costs and exceptional items.2. Before goodwill amortisation and exceptional items, but after charging £0.2m share option costs in 2004 (2003 – nil).3. Earnings per share is a pro-forma measure based on profit after tax, calculated using 36.3m shares in issue for both periods.

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Dividends

As previously stated: -

• accounts include pre-float dividends;

• 2004 final dividend proposal of £1.5m - for the half year

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Underlying Earnings

2004£m

2003£m

Operating profit ¹ 10.32 7.70 +34.1%

Interest (includes bank and streamline charges) (0.68) (0.90)

Profit before tax ¹ 9.64 6.80 +41.8%

Tax (2.92) (2.02)

Profit for the period ¹ 6.72 4.78 +40.7%Exceptional items (net of tax)

Flotation costs (3.07) - Severance payments - (0.06)

Share option costs (net of tax) (0.15) -

Goodwill amortisation (0.69) (0.69)

Profit for the period 2.81 4.03 -30.2%

1. before goodwill amortisation, share option costs and exceptional items

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Balance Sheet

2004£m

2003 £m

Fixed AssetsIntangible 11.0 11.7Tangible 1.3 1.6

12.3 13.3

Current AssetsStock 6.7 6.4Debtors 14.5 13.5Cash 0.8 -

22.0 19.9

Creditors < 1 year (30.2) (24.9)

Overdraft - (6.4)

Creditors > 1 year (0.2) (0.3)

Provisions (0.7) (0.7)

Net Assets 3.3 0.9

Debtors (days) 27 31Stock (days) 31 31Creditors (days) 72 66

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Cash Flow 2004£m

2003£m

Net debt at 1 January (7.2) (7.6)

Operating profit 1 10.3 7.7

Depreciation 0.6 0.6

Working capital 3.1 1.6

Interest and tax (2.9) (1.3)

Capital expenditure (0.3) (0.3)

10.8 8.3

Exceptional items paid (3.2) (0.1)

Cash inflow before financing anddividends

7.6 8.2

Dividends (1.5) (7.8)

Share issue 2 4.6 -

Shares redeemed (3.0) -

Net funds/(debt) at 31 December 0.5 (7.2)

Cash/(overdraft) 0.8 (6.4)

Finance leases and loan (0.3) (0.8)

Net funds/(debt) at 31 December 0.5 (7.2)

1. before goodwill amortisation, exceptional items and share option costs2. Share issue proceeds net of cost

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Future Issues

• Adoption of International Financial Reporting Standards:-

– Recognition of pension scheme deficit

– Goodwill subject to annual impairment review

• Consultation on Long Term Incentive Plan

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Focus 2005

• To maintain growth in profits and sales through:-

– growth in all market sectors

– achieving the highest degree of customer satisfaction

– cautious expansion of products and services

– merchandising strategy

– tight cost control

– developing further our single-source solution

– seeking suitable acquisitions

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Outlook

• Stable market

• Public sector consolidation

• Management of product price inflation

• Continued growth in outsourcing/single sourcing

• Drive to retain existing market share and win new customers

• Large tenders

• Measured confidence for 2005

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office2office plc

Results Presentation

Year ended 31 December 2004

END