Chairman's Statement

For the six months ended 31 March 2004

"Treatt USA's first six months were excellent with US Dollar turnover increasing by 54%"

The Group saw contrasting fortunes for the US and UK businesses for the six months to 31st March 2004, with Group turnover down by 1% to £15,073,000 (2003: £15,216,000) and profit before tax falling to £792,000 (2003: £955,000). As previously reported, depreciation costs for the Group are now significantly higher, and there was a 3% fall in EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) to £1,363,000 (2003: £1,409,000). Earnings per share have consequently decreased to 5.1 pence per share (2003: 6.5 pence per share). The Board has declared an unchanged interim dividend of 2.7 pence per share (2003: 2.7 pence per share) which is payable on 4th October 2004 to all shareholders on the register at close of business on 3rd September 2004.

Treatt USA's first six months were excellent with turnover increasing by 54% in US Dollar terms and profit before tax increased by $744,000, with a widely spread customer base. There was significant growth in our specialty TreattaromeTM "From the Named Food" range of products with Treatt USA being particularly well placed to benefit from the high demand for low carbohydrate products. The first half year saw continued investment in Treatt USA with further expenditure on plant and equipment in order to facilitate increased specialty production. It is therefore pleasing to see such a substantial improvement in turnover and profitability only 18 months after moving to the new facilities in Lakeland, Florida.

R C Treatt, the Group's UK operating subsidiary, experienced a 9% fall in sales and profits and margins were lower. This was because of the combined impact of the lower US Dollar and weakening orange oil prices which reduced profit before tax by about £500,000, although there was a 15% increase in the volume of orange oil sales. Bearing these factors in mind, the Board believe the performance of R C Treatt was satisfactory, especially in view of the successful implementation of its new Enterprise Resource Planning (ERP) computer system which went live on 1st January this year. The introduction of ERP did result in a great deal of extra work for our employees, and initially there was an impact on our customer service levels, but the company is already seeing significant benefits from the system in terms of improving efficiency and better management information.

As we predicted, orange oil prices have fallen over the last six months and are expected to continue to do so following the new Brazilian orange crop beginning in June 2004. Orange oil, however, represents just 22% of the Group's activity.

Cash flow for the first half year was strong with Group borrowings falling by £1.5m which was principally due to a reduction in inventory. Net debt was £3.1m and gearing was 18% (2003: 31%), with short term gearing reducing to just 4%. Based upon our current projections the cash flow in the second half should further reduce the overall debt position.

Prospects
The Board believe that Treatt USA will continue to perform well above original expectations in the second half of the year, and that there will be an improvement in the profitability of R C Treatt. The Group will continue to be affected by volatile orange oil prices. It is, however, too early to confirm confidently that the Group will meet its original forecast for the full financial year.

EDWARD DAWNAY
Chairman

24 May 2004