HIGHLIGHTS		Half-year to	Half-year to	Year to
		30.9.01	30.9.00	31.3.01
Turnover	£m	830.7	773.3	1,587.1
EBITDA	£m	128.9	160.4	268.0
Underlying operating profit*	£m	84.4	119.5	185.0
Profit before tax:
Underlying*	£m	71.8	111.2	163.4
Before exceptional items	£m	66.9	109.0	156.2
Reported	£m	69.1	99.2	137.9
Underlying earnings per share*	p	9.4	17.1	24.1
Dividends per share	p	4.5	4.4	12.8

* before goodwill amortisation and exceptional items, with comparative eps figures re-stated for FRS19 (deferred tax)

• Turnover increased by 7%, driven by last year's acquisitions in Europe and North America
  
• Underlying profit before tax of £71.8 million down 35%, reflecting an approximate 50% fall in US selling prices, but up 38% on the preceding half-year
  
• Global plasterboard and plaster volumes up nearly 20%, increasing 3% and 6% respectively on a like-for-like basis
  
• Further group-wide cost savings equal to 1.5% of turnover
  
• European sales margin mostly restored with an improvement of almost 3 percentage points over the second-half last year
  
• North American cost reduction plan ahead of schedule with $35 million annualised savings in place. This, together with an improvement in US selling prices, resulted in BPB's North American operations moving back into profit in September
  
• Interim dividend up 2.3% to 4.5p per share

Richard Cousins, BPB chief executive, said:

"Real progress was achieved in the first half year through continued volume growth, further cost reduction, easing commodity cost inflation and, latterly, better selling prices in the US. These trends have continued to benefit BPB's businesses since 11 September but, with concerns about a weakening in the world's largest economies, the outlook for the remainder of the year is less predictable."

OVERVIEW

BPB's underlying pre-tax profit for the first half of 2001/02 was 35% down on the corresponding period, mostly due to a fall of around 50% in US selling prices. This outcome does, however, represent a 38% uplift on last year's difficult second half and reflects management's drive for profitable sales growth, which delivered an improving North American performance and a recovery of almost three percentage points in the European sales margin.

FIRST HALF GROUP RESULTS

Group sales of plasterboard systems and complementary products increased by 7% to £830.7 million, following acquisitions last year in North America and Europe. Underlying operating profit of £84.4 million (£119.5 million) was lower due to the operating loss of £16.7 million incurred in North America, which represented a £28.5 million reversal on the corresponding period's profit in that region. BPB's underlying pre-tax profit fell by £39.4 million to £71.8 million.

Global plasterboard volumes (including acquisitions) were 17% higher, increasing 3% on a like-for-like basis. North American volumes, including Celotex's improvement in market share, were up 15% like-for-like, while European volumes were marginally lower due to the continuing construction recession in Germany.

US wallboard prices fell below the severely eroded levels experienced in last year's second half, reaching a low around the mid $60's per 1,000 square feet (approximately half the level of a year earlier) and reducing regional income for the period by £35 million compared with last year. However, since July three selling price increases have led to average prices improving by some 40% and this, combined with substantial progress in reducing the North American cost base, has resulted in the region's performance in the first half improving from a substantial operating loss in the opening months to a small profit (before restructuring costs) in September.

Headline plaster volumes grew almost 20%, reflecting the group's acquisition of Egypt's market leader. Like-for-like sales growth was a robust 6%, with the increase in overall volumes driven by continuing strong demand in Spain and Eastern Europe. Further development of BPB's building plasters business will follow from the recent acquisition of the second largest supplier in Turkey's growing construction market.

Concerted management action to reduce the cost base resulted in £12 million of further cost savings (primarily from North America and Germany), equal to 1.5% of group turnover, although associated redundancy costs of £4 million were £3 million higher than in the corresponding period. In addition the pace of cost inflation eased, driven by lower prices for recycled paper and steel, although across Europe this led to some competitive pressures on the product selling price improvements made in the previous autumn-spring period.

Underlying earnings per share declined 45% to 9.4 pence, with the fall in profits exacerbated by a higher estimated group tax rate due to unrelieved US trading losses. Reported pre-tax profit was £69.1 million (£99.2 million) after goodwill amortisation of £4.9 million (£2.2 million) and a net exceptional gain on disposals of £2.2 million (net charge of £9.8 million).

Cash generation continued to be sound, with EBITDA of £128.9 million (£160.4 million). After capital expenditure of £39.5 million (£5 million below the level of depreciation), free cash flow was £4.5 million (£48.8 million). The group net interest charge increased £3.2 million to £14.4 million on average net debt of £495 million, and shareholders' funds of £707.8 million were £61.2 million lower as a result of the prior year adjustment made on adoption of the new accounting standard on deferred tax (FRS19).

The post-tax return of 7% on average capital invested was down on the comparative period's 12.9% but up 1.4 percentage points on last year's second half.

REGIONAL TRADING PERFORMANCES

Europe

European operating profit of £96.6 million was down 8% on the corresponding period but improved by 24% on last year's second half performance which had been restricted by bad weather and severe cost inflation. Regional sales margin recovered to 14.5% from the second half's 11.7% but was below the comparative period's 15.6% primarily because of lower sales volumes in Germany and weaker profits from paperboard activities.

North & Western Europe

Operating profit was £6 million lower at £50.5 million due principally to a reduction in profit from paperboard, which saw selling prices fall in response to pressure from continental European competitors who benefited from favourable exchange rates. Profitability was also affected by slightly lower plasterboard volumes and by some £2 million of higher energy costs as favourable gas contracts in the UK came to an end. Cost savings were on target and plasterboard selling prices improved slightly in key markets although they came under competitive pressure as the first half progressed.

Construction activity in the UK slowed as the renovation market remained buoyant but the commercial sector flattened and house starts declined by 3%. The pace of growth in Irish construction also slowed, marked by a 20% reduction in new housing. Trading conditions in Nordic plasterboard markets remained difficult, being partly offset by an increase of more than 30% in sales to Russian and Baltic markets.

In combination, these factors resulted in regional plasterboard volumes declining by 1% although plaster sales were more resilient and grew by 2%.

Southern Europe

During 2000/01, and particularly in the second half, the region was hit hard by cost inflation but margins were underpinned by improvements in selling prices and operating efficiencies. In contrast, first half profits this year declined 6% to £36.4 million due to lower sales of core products and reduced selling prices for steel accessories and expanded polystyrene insulation products.

Regional plasterboard volumes were up 1% but sales in the key French market were slightly weaker due to a reduction in housing starts and were further restricted by labour skill shortages in the construction industry. Plasterboard volume growth continued in Italy despite a slower commercial sector, while favourable construction conditions in Iberia resulted in strong demand for plasterboard systems and building plasters, up more than 20% and 5% respectively.

Central & Eastern Europe

A regional first half operating profit of £9.7 million represented a substantial improvement on last year's small second half operating profit, and was ahead of the comparative period by 5%, despite a significant reduction in plasterboard demand and continued pricing pressures in Germany.

The turnaround in profitability was achieved through the completion of a broad business restructuring in Germany, which removed surplus plasterboard capacity, reduced the workforce by nearly 20%, streamlined administrative processes and sharpened the group's market focus. Annual operating costs were reduced by some £5 million.

Sales volumes of core products elsewhere in the region grew well. In August BPB acquired the Turkish plaster business of Dogan Alci, building on a group trading operation introduced two years earlier and establishing a national market share of over 20%.

North America

Very low US wallboard prices resulted in BPB's North American region, including six months' trading at Celotex (two months in the corresponding period), reporting an interim loss of £16.7 million, after charging £3 million of plant closure costs and £1.4 million in related redundancy charges; a profit of £11.8 million had been posted in the first half of 2000/01.

A recovery in selling prices took place later in the period, against the background of a continued strong US wallboard market which was driven by buoyant housing demand. The wallboard industry reduced capacity by closing plants and/or reducing shifts, with the result that overall utilisation (which had fallen to approximately 75% last spring) improved to around 85%. BPB was part of that process, closing the Port Clinton plant in July in accordance with a restructuring programme which also included the closure of a ceiling tile plant and one of two plasterboard liner machines at the Quincy paper mill. The group's North American business recovery plan is now two-thirds in place and ahead of the schedule to deliver at least $50 million of annualised cost savings by March 2003.

Rest of the World

The 41% increase in operating profit to £4.5 million was mainly due to BPB's new investment in Egyptian building plasters. The acquisition, which was announced last February, secured a leadership position and a sound business base from which to develop the local market.

South America recorded a small operating loss as volumes were maintained despite very difficult economic conditions in Brazil and Argentina. Lower commercial demand in Southern Africa was partially offset by higher plasterboard sales in the housing sector but profit progress was held back by currency weakness, which adversely affected the costs of key raw material imports. Good progress was made in Asia with better Thai results reflecting strong domestic demand. China remained a highly competitive market, but operating efficiency improved as volumes increased.

CURRENT YEAR OUTLOOK

BPB remains focused on enhancing the group's positioning in its key markets, aiming to deliver improved shareholder value via continued development of the core European business, restoration of a profitable base in North America and strengthening free cash flow and return on investment.

Real progress was achieved in the first half year through continued volume growth, further cost reduction, easing commodity cost inflation and, latterly, better selling prices in the US. These trends have continued to benefit BPB's businesses since 11 September but, with concerns about a weakening in the world's largest economies, the outlook for the remainder of the year is less predictable.

Accordingly, the Board has concluded that it would be appropriate to increase the interim dividend by 2.3% to 4.5p per share.


Click here to view the full release and financial statements.

Contacts:

Richard Cousins, Chief Executive (today 020 7251 3801 thereafter 01753 898911)

Peter Sydney-Smith, Finance Director (today 020 7251 3801 thereafter 01753 898822)

James Murgatroyd/Faeth Finnemore, Finsbury (020 7251 3801)

Available on BPB’s web site: www.bpb.com

Note for media: High resolution images of Richard Cousins can be downloaded from NewsCast at www.newscast.co.uk

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