HIGHLIGHTS		Half-year to 30.9.03	Half-year to 30.9.02	Year to 31.3.03
Turnover	£m	1,089.2	953.3	1,931.2
Operating cash flow (a)	£m	176.0	146.1	316.1
Underlying operating profit (b)	£m	121.7	110.0	220.5
Underlying profit before tax (c)	£m	107.8	95.6	191.6
Reported profit before tax	£m	95.0	1.2	48.4
Underlying earnings per share (c)	p	14.6	13.1	25.8
Dividends per share	p	4.80	4.65	13.55

(a) before payment in the second half of 2002/03 of BPB's £89.2 million European Commission fine (b) before goodwill amortisation and exceptional items (including BPB's EC fine) (c) as in (b) but also before BPB's £1.3 million share of associate's EC fine in the second half of 2002/03

• Turnover up 14% to £1.1 billion due to further volume growth and acquisitions made last year
  
• Underlying profit before tax up 13%, in line with expectations, to £107.8 million (up 7% in local currency)
  
• Further growth in plasterboard sales volumes – up 12% to over 550 million square metres (including acquisitions). Group like-for-like sales up 6%
  
• European, North American and Rest of the World business regions delivered improved results, increasing underlying operating profit by 11% to £121.7 million
  
• Reported profit before tax of £95.0 million (2002 £1.2 million), reflecting improved underlying results and substantially lower net exceptional charge
  
• Underlying earnings per share up 11% to 14.6p
  
• Operating cash flow up 20% to £176.0 million, with free cash flow up £19.1 million to £51.6 million
  
• Interim dividend up 3.2% to 4.8p per share

Richard Cousins, BPB chief executive, said:

“BPB has reported solid overall first half results, with management focusing hard on strengthening the group’s core businesses to deliver further profitable growth.”

GROUP RESULTS OVERVIEW AND BUSINESS DEVELOPMENTS

Building on the substantial progress achieved in 2002/03, BPB delivered a further solid improvement in the first half as underlying pre-tax profit (before goodwill and exceptional items) advanced 13% to £107.8 million on group turnover up 14% to £1.1 billion. Results in local currency were up 7% on the corresponding period and group operating cash flow strengthened 20% to £176.0 million, reflecting further growth in plasterboard sales volumes and acquisitions made last year.

Management’s priorities in the current year are focused on developing the group’s core plasterboard business and improving manufacturing competitiveness in order to further strengthen BPB’s global leadership position. Key elements of progress in the first half resulting from that sharpened strategic focus were:

• growth in plasterboard sales volumes to over 550 million square metres – an increase of 12% (including acquisitions) and up 6% on a like-for-like basis
  
• expansion of future capital investment plans to meet the growth in global plasterboard demand anticipated over the medium-term
  
• investment committed in new IT business systems to better serve BPB’s European markets (with the development programme commencing in the key UK and French businesses) and to complement the existing infrastructure in North America
  
• strengthening of BPB’s European model for plasterboard liner supply, by entering into a new long-term supply arrangement for substantially increased quantities from the group’s 29% owned German associate, Tecnokarton, resulting in the likely closure of a UK paper mill
  
• roll-out of programmes to achieve world-class plasterboard manufacturing performances over the medium-term and to leverage purchasing economies from the group’s annual spend on business inputs of around £1 billion
  
• worldwide cost savings from on-going businesses of around 1% of group turnover

Underlying operating profit increased 11% to £121.7 million, up more than 5% in local currency terms as BPB’s European, North American and Rest of the World operations delivered an improved first-half result from the continuing good growth in plasterboard sales and stable overall building plaster volumes. Groupwide restructuring and redundancy charges, including the integration of Gyproc Benelux, taken against operating profit were £9.9 million (2002 £12.1 million). Group return on sales was 11.2% (2002 11.5%), as European profitability was dampened by temporary additional internal carriage costs to meet plasterboard demand in markets where local capacities were constrained.

Free cash flow was stronger than in the corresponding period, increasing by £19.1 million to £51.6 million. Capital expenditure was £13.0 million lower than the depreciation charge of £53.6 million, largely due to the timing of investment programmes which are expected to result in second-half expenditure exceeding depreciation. The post-tax return on average capital invested improved from 8.8% to 9.4%, well above the group’s weighted average cost of capital.

The group interest charge increased by £1.1 million to £15.8 million principally due to higher levels of average net debt following the payment of the European Commission fine and the acquisition of Gyproc Benelux in the second half of the last financial year. However, interest cover improved to 7.7 times earnings (2002 7.5 times).

Underlying earnings per share rose by 11% to 14.6p, reflecting the first-half growth in profit and improved results from associates. The group’s underlying effective tax rate was 32% (2002 32%).

Reported pre-tax profit was £95.0 million (2002 £1.2 million) as a result of BPB’s improved underlying performance and a substantially lower net exceptional charge of £3.9 million (comprising £7.8 million mostly relating to redundancy costs arising from the anticipated closure of the Purfleet paper mill, offset by a £3.9 million gain on asset disposals). The net exceptional charge of £86.8 million reported in the corresponding period included £90.1 million for the European Commission fine.

The interim dividend will increase by 3.2% (2002 3.3%) to provide a payment of 4.8p per share for the six months ended 30 September 2003.

REGIONAL RESULTS AND BUSINESS DEVELOPMENTS

Europe

European underlying operating profit of £97.1 million (2002 £94.3 million) benefited from a stronger Euro but included substantially higher restructuring charges. Regional results reflected good overall plasterboard volume growth and marginally better selling prices in core markets, although further operating efficiencies were offset by cost inflation. During the period, management activities were reorganised under a country-based structure to remove a layer of regional bureaucracy and increase the pace of performance improvement.

BPB’s new long-term supply arrangement for plasterboard liner will bring significant benefits by reducing the overall cost of liner within Europe, improving security of supply, reducing currency exposure, and optimising logistics to the group’s continental plants. As a consequence of the new sourcing arrangement, the UK paper mill at Purfleet (representing approximately 45% of group liner capacity) has become uncompetitive and consultations with the workforce are underway regarding the likely plant closure by the year end. At this stage, no final decision has been taken as to the future use of the site but it is estimated that the group’s ultimate consequential pre-tax net exceptional charge will be around £20 million after allowing for future site disposal proceeds.

North & Western Europe

Continued high levels of demand for core products in the new housing and renovation sectors and better selling prices contributed to an improved performance in the UK and Ireland. Despite lower profitability from the group’s UK-based paperboard operations due to reduced sales, and from the Nordic plasterboard business due to weaker construction activity in Sweden and Norway, BPB’s overall underlying operating profit increased 7% to £50 million in this region.

In order to more efficiently meet increased demand in the UK, a major capacity extension is to be commissioned at the East Leake plasterboard plant during the second half.

Southern Europe

Good plasterboard volume growth in France, Spain and Italy was driven by strong demand in the residential and renovation sectors, despite continuing weakness in commercial activity. Building plaster volumes were lower due to the group’s transition to added-value products in Spain, BPB’s largest plaster market, and the construction recession in Portugal. Results from the newly-formed Iberian distribution business were encouraging, contributing to faster growth in sales of Spanish plasterboard.

However, regional underlying operating profit was lower at £38.7 million (2002 £41.5 million), despite favourable currency translation, as operating margins were affected by higher restructuring costs and additional carriage costs to service the Spanish plasterboard market during the commissioning of additional capacity at the Quinto plant.

Integration of the acquired Belgian, French and Dutch operations of Gyproc Benelux is progressing to plan and, following consultations with employees, operations at the Wijnegem plant in Belgium will be phased-out during 2004 in preparation for the site’s eventual disposal. Cost saving initiatives, involving additional restructuring charges this year, are more extensive than originally envisaged but will yield greater savings in 2004/05.

Central & Eastern Europe

Profitable growth was achieved in Eastern Europe, driven by further strong demand for core products, generally better selling prices and improved trading conditions in the Polish plasterboard market. Despite the impact of a continuing difficult trading environment for the German business, regional operating profit advanced 35% to £8.4 million.

German plasterboard volumes, which now represent less than 50% of regional sales, were lower than the corresponding period and actions continue to be taken to strengthen BPB’s market position and reduce the operating cost base. Elsewhere, strong volume growth was achieved in Poland and in the emerging markets of the Czech Republic, Hungary, Romania and Greece.

Regional building plaster demand continued to be strong, mainly due to double-digit volume growth in eastern Europe and Turkey. During the period BPB acquired the minority interest in its Turkish plasters business.

North America

Regional operating profits rose over 45% to £17.3 million, benefiting from lower restructuring costs and a robust volume performance, with continuing strong demand in the US and Canadian residential and renovation sectors. However, return on sales (before restructuring costs) was lower at 7.2% (2002 8.9%) due to marginally lower average selling prices and higher natural gas costs.

Average realised wallboard selling prices in the US were $89 per 1,000 square feet (against an average of just over $90 for the corresponding period), improving to a spot-rate of around $93 towards the end of the period. Following the September price increase, wallboard selling prices have now increased to around $95, sustained by the continuing high level of housing demand, although activity is expected to experience the usual slow down during the winter. The Canadian wallboard business achieved a good result with profits up on the prior period, driven by a strong volume performance and similar pricing trends to those experienced in the US.

The US ceiling tiles business, although cash generative, reported a small operating loss due to continuing weak commercial demand (overall commercial construction activity has declined by more than 25% during the past two years). As part of a business recovery plan launched last month, US management announced the alignment of the ceiling tile and wallboard management operations and the planned closure in the second half of the cast tile plant near Pittston, Pennsylvania.

Rest of the World

An excellent performance in Asia contributed to the group’s improved earnings and cash flow. Thai profits increased, benefiting from strong domestic and export volumes, and results in China and India also improved. South African and Egyptian results were stable overall and the Brazilian business recovered to almost break even. In total, operating profit almost doubled to £7.3 million, with a substantially improved return on sales in excess of 13%.

CURRENT YEAR OUTLOOK

BPB has reported solid overall first half results, with management focusing hard on strengthening the group’s core businesses to deliver further profitable growth.

While there are some mixed signals regarding economic growth prospects in the group’s key markets, the pattern of trading has continued into the second half in line with expectations and accordingly the Board remains confident that BPB will achieve further progress for the year as a whole.

This announcement, together with the group’s interim results presentation to analysts, will shortly be available on BPB’s website: www.bpb.com

View the full interim results (PDF, 182KB).

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