1998 was a record year for Drinks Dispense with both sales and operating profit over 7 per cent ahead of last year.

Excellent progress was made in aligning our business to take full advantage of ongoing consolidation within our customer base. Global partnerships with our principal customers have been further strengthened through a significant expansion of our dedicated account management capability and increases in our research and development investment. Our commitment to reducing operating costs and improving service levels remains on target as we begin to reap the rewards of streamlined manufacturing centres adopting world-class manufacturing processes. Consolidation of production resulted in a further two factory closures during the year and record levels of capital expenditure were sanctioned.

We enjoyed another year of good growth in the US, helped by a continued focus on both fountain and juice equipment by our principal customers and a very pleasing contribution from new products launched during the period. Operating margins also benefited from higher volumes, improved productivity and the first fruits of our global supplier development programme.

We also advanced in the UK with strong demand from brewers in support of a number of re-branding exercises. Again new products made a good contribution. Profits, however, were lower than last year with the costs of product development and factory rationalisation more than offsetting the benefits of higher volume.

Continental European markets proved a mixed bag. We experienced a further downturn in the German market but enjoyed considerable growth elsewhere particularly in the improving economies of Southern Europe and the still expanding markets of Eastern Europe. Good progress was also made in developing the sales of our juice equipment lines acquired last year through the purchase of Wilshire.

Demand in Asia Pacific was depressed by the poor economic conditions in the region with beer dispense equipment most affected. Our principal soft drinks business however, remained reasonably robust.

Whilst some markets are showing signs of a modest recovery we are not expecting a return to historic growth trends in Asia Pacific in 1999.

Our Cannon group in the USA enjoyed another record year, building on the strong growth of the previous year
and improving margins through a combination of lower operating costs and favourable product mix. Our point of purchase merchandising business performed especially well and offers good future prospects on the back of widespread consolidation in the US supermarket industry.