INCOME STATEMENT ANALYSIS
Williamson Tea Kenya Limited reported 131 per cent drop in profit after tax (Loss of KES 39 million) for the six-month period ended September 30 2007. Turnover was KES 588 million, up 1.55 per cent from KES 579 million in the same period in 2006. Loss before tax for the six-month period was KES62 million, compared to profit before tax of KES186 million for the same period last year. Included in the net profit for the period are the impacts of minority interest and taxation charges.

BALANCE SHEET ANALYSIS:
Total assets were KES 3.5 billion, a 6.5 per cent increase from the same period a year-ago. Total liabilities increased by 10 percent. Total non-current liabilities were up 23% compared to the same period in 2006.

CASH FLOW ANALYSIS:
Williamson Tea reported a deficit of KES171 million (negative cash) from its operating activities, compared to KES37 million cash generated from its operating activities for the same period in 2006. In the same period Williamson Tea invested KES49 million in their business, a 35 percent drop compared their investing activities in the same period a year-ago. The company generated negative cash flows from their financing activities, reporting a deficit of KES17 million, which is 200% more that the deficit reported in the same period last year.

Williamson Tea’s free cash flows:
Free Cash Flows are a way of measuring cash that is available to a company for discretionary use. Free Cash Flows can be defined as cash flows from operating activities less cash outlays necessary for the replacement of operating capacity (capital expenditures). It is a measure of cash that is available for discretionary use by the company. As such, the calculation of free cash flows is somewhat arbitrary since it assumes a certain level of reinvestment to replace existing capacity. Generally it is defined as cash flows from operations less capital expenditures to maintain the company’s current operating capacity. Therefore, free cash flows are those cash flows available to grow the company, pay back debt, pay dividends, or repurchase stock.

In the six month period ending September 30^th, 2007, Williamson Tea reported negative free cash flows. Williamson had a deficit of KES258 million in free cash flows compared to a deficit of KES44 million from the same period a year-ago.

MANAGEMENT COMMENTARY ON RESULTS:
Crop production is slightly below estimate as a result of the severe drought experienced in the 4^th quarter of last year but on the recovery path after the expected short rains. During the period tea prices had improved but have since declined substantially and realizations have been eroded by the strong Kenya Shilling.  The company is facing serious cash flow constraint due to a dispute, in common with other agricultural exporters over VAT refund claims disallowed by the Kenya Revenue Authority against which an appeal has been lodged in the VAT Tribunal and the High Court.

This is compounded by long delays in our export shipments reaching our overseas customers due almost entirely to the on-going congestion at the port of Mombasa. With the continuing World Tea oversupply position and negotiations with the Union for a new two year Collective Bargaining Agreement from 1^st January 2008, prospects for the remainder of the year are not encouraging.

By Order of the Board