MALLETT PLC

Interim Report for the 6 months ended 30th June 2008

Dear Shareholder

Our interim results for the six months ended 30th June 2008 show an operating loss of £328,000 (2007 - profit of £1,143,000). Whilst it is disappointing to report a trading loss for the group, these results have been significantly impacted by the launch of two exciting new ventures in the period which, it is hoped, will take Mallett forward into the next stage of the development of the group.

Launch of two businesses

Firstly, we launched Meta, our contemporary designs business, and its first range of products to the press at the Salone Internazionale del Mobile in Milan on 15th April. This was followed by a sales exhibition in New York from 12th to 16th May. The range features nine products from five leading contemporary designers - Hani Rashid, Tord Boontje, Matali Crasset, Barber Osgerby and Wales & Wales - and coverage in the media has been exceptional with over 100 articles in international press and specialist magazines. Interest has been encouraging with sales in the 1½ months since the sales launch in New York totalling £182,000. However, the complexity of some of the designs, combined with the use of rare materials and traditional production techniques which is a key aspect to all of Meta's products, led to a delay in the launch and an increase in the overall cost of the project to the launch in May from £1,000,000 to £1,300,000. Costs of £1,032,000 have been charged to the income statement in the first six months of this year and £482,000 is included in inventories.

Secondly, we launched James Harvey British Art in April as our picture gallery in new premises in Chelsea, London. Separating out our picture department from Mallett in this way gives it a separate platform from which to market itself and grow under the leadership of James Harvey. James has been with Mallett for eighteen years and has established himself as a knowledgeable and respected expert on British artists from the 17th century to the present day. The fit-out of the new premises took three months at a cost of £150,000, but since the launch in April the gallery has had total sales of £1,010,000 which is a 35% increase on the group's picture sales for the six months ended 30th June 2007.

Core business

Excluding Meta, the group made an operating profit of £522,000 (2007 - £1,143,000) on turnover of £7,983,000 (2007 - £10,666,000). The 54% reduction in operating profit compared to the same period for last year reflects the difficult trading conditions currently seen in the antique art market and more generally in the retail sector. In addition, it reflects a 50% increase in the rent on our Bond Street showroom. The operational review being undertaken by the Board is focussing both on our sales strategy to improve revenues and our cost base. We anticipate being able to report our conclusions from the review in the course of the second half of the year.

Dividend

As mentioned above, the significant launch costs of Meta has meant that the group has made a loss for the six months to 30th June 2008. The loss after tax for the group is £197,000 (2007 - profit of £1,035,000) and basic and diluted earnings per share is -1.45 pence (2007 - 7.60 pence). The Board has therefore decided not to declare an interim dividend for the six month period to 30th June 2008 (2007 - 2.4 pence).

Outlook for the second half

We expect little change in the trading conditions in the antique art market for the rest of the year. We will continue to market the finest antique furniture and works of art with a catalogue and two fair exhibitions in the second half of the year, whilst focusing on cost efficiencies. Meta intends to send out a catalogue featuring all nine of its products and have a London exhibition of the pieces in our Bond Street showroom during Frieze week, the most prestigious contemporary art fair in London, in October. We then plan to bring the two businesses together at Art Basel Miami Beach in December, the most important contemporary art and design show in the United States, with a combined Mallett/Meta exhibition showing the finest furniture designs through the ages.

  For further information please contact:

Lanto Synge, Chief Executive            020 7499 7411

Michael Smyth-Osbourne, Finance Director        020 7499 7411

  MALLETT PLC

Statement of Directors' Responsibilities

The directors confirm that to the best of their knowledge:

By order of the Board

Notes to the Interim Report

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