HIGHLIGHTS		2004	2003	% increase
Turnover	£m	2,170.8	1,931.2	12.4
Underlying profit before tax *	£m	222.8	191.6	16.3
Reported profit before tax	£m	180.3	48.4	272.5
Underlying earnings per share *	p	30.5	25.8	18.2
Final dividend per share	p	9.45	8.9	6.2
Total dividends per share	p	14.25	13.55	5.2

* before goodwill amortisation and exceptional items described in the group profit and loss account

• Good growth in plasterboard demand and better selling prices increased turnover by over 12% - consolidating BPB's global leadership position
  
  
• Underlying operating profit up 13% (up 10% in local currency) to £249.2 million as all three regions delivered improved trading performances
  
  
  
  • European profit up over 6% to £193.9 million, with further good volume growth and the benefit of a stronger Euro more than offsetting higher restructuring costs
    
    
  • North American profit up 36% to £40.1 million due to improved average selling prices, further strong volume growth and a significant reduction in restructuring costs
    
    
  • Rest of the World profit up 67% to £15.2 million, driven by strong volume growth in Asia
    
  
  
• Underlying profit before tax up 16% to £222.8 million and underlying earnings per share up 18% at 30.5p. Reported PBT up £131.9 million, reflecting improved results and a lower net exceptional charge of £24.5 million (2003 £127.0 million)
  
  
• Operating cash flow of £350.5 million and year-end net debt down almost £170 million to £495.0 million
  
  
• Final dividend up 6.2% to 9.45p, giving a total dividend up 5.2% at 14.25p per share
  
  
• Investment of around £250 million planned in new plasterboard and plaster capacity, with major new plant additions in Romania, India, Thailand, Malaysia and the US
  

Richard Cousins, BPB chief executive, commenting on the year's results said:


"Management continued to deliver on its business plan for future growth, achieving a strong performance for 2003/04 and committing to invest some £250 million in new plants and capacity to strengthen our global leadership position in plasterboard and building plasters."


GROUP RESULTS OVERVIEW


Following on from the substantial uplift in results posted for the previous year, management delivered profits ahead in all three major regions, with group pre-tax profit (before goodwill and exceptional items) advancing 16.3% to £222.8 million. Reported profit before tax was £180.3 million, substantially higher than last year's £48.4 million due principally to the improved underlying results and a lower net exceptional charge of £24.5 million (2003 £127.0 million including BPB's European Commission fine of £89.2 million). Underlying earnings per share rose by 18.2% to 30.5p and the post-tax return on average capital invested improved from 8.8% to 9.9%.


BPB's 12% increase in turnover to £2,170.8 million (up 9% in local currency terms) was underpinned by further good growth in demand for plasterboard systems and gypsum plasters in the group's principal markets, which saw greater activity in the residential and renovation sectors. This drove a 13% uplift in underlying operating profit to £249.2 million (2003 £220.5 million). Restructuring and redundancy costs of £20.2 million (2003 £19.6 million), included in the group operating result, mostly related to the Gyproc Benelux integration and European efficiency initiatives. The improvement in group return on sales to 11.5% (2003 11.4%) was modest as the benefit of better selling prices was more than offset by higher input inflation, particularly for energy, and European profitability was affected by additional costs of freight (as localised plasterboard capacity shortages were met) and operational disruptions caused by plant upgrades.


Group sales of plasterboard and accessories increased 15% to £1,381 million, representing 64% of BPB's turnover. Group plasterboard sales volume grew nearly 11% (including acquisitions), and almost 7% on a like-for-like basis due to continuing strong US and Canadian housing activity, further volume growth in France and the British Isles, and greater demand in the emerging markets of Eastern Europe and Asia. European volumes grew almost 10% to over 570 million square metres (up 5% on a like-for-like basis before the acquired contribution from Gyproc Benelux), with strong demand in the British Isles and French volumes continuing at a high level. The German construction market remained difficult, reflected in further volume contraction, and sales performances across the Nordic countries were mixed. However, volume growth rates continued to be encouraging in the developing markets of the Mediterranean and Eastern Europe. North American wallboard volumes of over 500 million square metres were underpinned by continuing strong residential markets in the US and Canada, with headline growth of 11% (up 8% on a like-for-like basis before an extra month's contribution from the James Hardie Gypsum business acquired in the previous year). Volumes in the Rest of the World advanced 16% to over 80 million square metres driven by Asian demand, which increased over 30% from further strong growth in Thailand, China and India.


Overall plaster volumes (comprising building, industrial and specialist plaster sales) increased by almost 4% to nearly 5.5 million tonnes, with revenue increasing 13% to £345 million (16% of group turnover). Sales of building plaster increased almost 4% to nearly 4.5 million tonnes, with strong growth in the UK and Eastern Europe offsetting a further small contraction in France. Volumes were slightly higher in Spain, BPB's largest market and representing over a third of group volumes, as the improvement in product mix continued with higher margin lightweight plasters replacing traditional plasters. In the Rest of the World, Egyptian sales were restricted by a weak economy but encouraging growth was achieved in the developing plaster markets of Thailand and India. Industrial, moulding and specialist plaster volumes grew over 3% to around 1 million tonnes, including increased penetration by BPB Formula in dental, sanitary ware and other niche markets, combined with geographic expansion in emerging markets in partnership with existing BPB businesses.


Group turnover from other building products increased 4% to £445 million (20% of group turnover) and principally comprised European insulation and fixings, Spanish distribution, and North American and European ceiling tiles. BPB's new Iberian distribution business, established through an acquisition programme in Spain which completed in 2002, continued to make good progress with sales turnover increasing by over 20% to £60 million.


During the year the group incurred input cost inflation of about £40 million, representing some 2% of its cost base, with the major increases being energy (particularly US gas), European freight and groupwide employee costs. Cost pressures continue, with freight costs increasing in the US, UK and Germany and energy prices beginning to rise globally.


Groupwide cost savings represented 0.5% of turnover, below the on-going annual target of more than 1%, mainly because of operational disruption in the UK, France and Spain ahead of successful plant upgrades. Key operational initiatives undertaken by management during the year to improve efficiencies and profitability, the main benefit of which will impact on 2004/05 results, included:

• reducing plasterboard liner costs in continental Europe by sourcing increased volumes from Tecnokarton
  
• restructuring the sales, marketing and administrative functions in Germany to streamline the business around plasterboard and insulation products
  
• re-organising the Belgian operations following the acquisition of Gyproc Benelux, investing in improving the Kallo plasterboard plant and gradually phasing out activity at the Wijnegem plant prior to its planned closure
  
• re-organising the sales and manufacturing functions of the US ceiling tiles business and closing the Pittston cast tile plant
  
• progressing world class manufacturing initiatives to converge key plants onto best practice methodologies relating to safety, customer service, product quality, operating efficiency and capacity utilisation
  
• leveraging the group's scale to provide global purchasing and supply-chain efficiencies.
  

BPB again demonstrated its strong cash generation ability, with a net cash inflow of £120.3 million. This, together with a favourable translation impact on foreign currency borrowings, contributed to year-end net debt falling by almost £170 million to £495.0 million.


The Board is recommending for shareholder approval a 6.2% increase in the final dividend to give 9.45p per share, resulting in the company's annual dividend increasing 5.2% to 14.25p (2003 3.4% increase) and enabling dividend cover to improve from 1.9 to 2.1 times underlying earnings.


BUSINESS GROWTH STRATEGY


BPB's strong performance for 2003/04 accompanied a subtle but important shift in strategy aimed at focusing investment on strengthening the group's global leadership in plasterboard and building plasters.


BPB's annual plasterboard sales volume from over 50 national markets now represents nearly 20% of a world market of some 6 billion square metres, where demand is approaching 1 square metre per head and exhibiting long-term average annual growth of about 5%. Behind this positive global picture there are significant business development opportunities for the group arising from:

• an enlarging Europe, with its mix of more-developed and emerging markets, which is currently growing at 5-6% per annum from a relatively under-developed per capita base of less than 3 square metres,
  
  
• the advanced North American market (now at 10 square metres per head and representing over 50% of world demand), growing at more than 3% per annum over the long-term and providing scope for further investment, and
  
  
• the huge potential markets of Asia with their fast expanding economies driving double digit growth in demand.
  

Arising from BPB's sharpened strategic focus, the group commenced two key initiatives to strengthen its competitive positioning over the medium-term and grow profitably from the development of its global business sector:

• the expansion of BPB's capital investment plans, using the group's strong cash flow to uplift annual spend to around 1.5 times depreciation, and
  
  
• the roll-out of a programme to achieve world class manufacturing performance and to leverage purchasing economies, developing sustainable improvements which are repeatable across the group.
  

REGIONAL OPERATING REVIEWS


EUROPE
Turnover £1.65 billion (up more than 13%); underlying operating profit of £193.9 million (up over 6%)


European underlying operating profit advanced over 6% to £193.9 million, on top-line sales up more than 13% to £1,647.4 million, due to organic growth in plasterboard volumes of 5% driven by strong demand in the British Isles, France, Spain and Eastern Europe. Headline volumes were up almost 10%, boosted by the acquisition of Gyproc Benelux. The benefit of further cost savings, a stronger Euro and a modest contribution from Gyproc was offset by substantially higher regional restructuring costs of £18.6 million (up £9.5 million, mostly relating to the integration of Gyproc) and by additional freight costs, mainly to meet greater demand.


Continuing penetration of dry-wall technology in developing markets, combined with increasingly demanding building regulations in more developed markets, has over the last five years led to industry plasterboard volumes growing by an estimated average of 3 percentage points per annum above European GDP growth.


North & Western Europe
Turnover £588.5 million (up almost 4%); underlying operating profit £105.1 million (up nearly 10%)


Buoyant second-half trading conditions were experienced in the British Isles with further good volume growth of core products and better selling prices which, together with an overall full year improvement in Nordic performance resulting from cost efficiencies and increased plasterboard volumes in Finland and Denmark, offset the impact of lower profits from the reduced sales of the UK-based paperboard operations and led to regional underlying operating profit increasing nearly 10% to £105.1 million.


Good growth in UK demand for plasterboard systems and building plasters, which benefited from a mild winter, was driven by continued high levels of activity in the renovation sector and improved new housing demand, supported by further government public spending. Substantial additional plasterboard capacity was brought on-stream at East Leake to service growing demand and in anticipation of the impact of recent changes to building regulations which specify requirements for greater levels of thermal insulation and soundproofing. Enhanced housing partition systems such as Gypwall RAPID, together with added-value products including Wallboard TEN and new thermal laminate boards, have been developed to meet more stringent specifications. During the plant upgrade, plasterboard was imported from BPB's Belgian business and the resulting additional freight costs largely offset the benefit of cost saving initiatives. Cost inflation pressures during the year were offset by modest selling price improvements.


Following the decision to source lower-cost lighter-grammage plasterboard liner from Tecnokarton in Germany for most of the group's continental European businesses, the paper mill at Purfleet became uneconomic. As a consequence the plant was closed and the UK-based paperboard operations were subsequently downsized and re-organised to focus UK, Irish and Nordic supplies on the two liner machines at the Aberdeen mill. In addition, the Abertay paper sacks business was sold.


Irish demand for construction materials remained high throughout the year, sustained by an active new housing sector, and resulted in strong volume growth of plasterboard and building plasters. Additional board was imported from Belgium to cover sales demand and added significantly to logistical costs. Inflationary cost pressures were, however, offset by better selling prices of core products. Extra capacity will soon be added to the combined plasterboard and plasters plant at Kingscourt.


Profitability in the Nordic region improved, reversing the decline experienced over recent years, as country management teams were reorganised and strengthened. Overall plasterboard volumes increased and this, together with cost efficiencies, exceeded the regional impact of cost inflation. Mixed trading conditions continued. Denmark achieved a good performance, supported by further pan-European demand for Gyptone ceiling tiles, plasterboard volume growth and cost savings. While domestic plasterboard volumes in Finland grew well, exports to Russia were restricted by the strength of the Euro. Weak construction activity in Sweden and fierce price competition from imports to Norway depressed plasterboard sales, particularly in the commercial sector, but profitability was maintained by further cost savings.


Southern Europe
Turnover £728.1 million (up over 22%); underlying operating profit £76.2 million (down 4%)


Regional turnover increased over 22% to £728.1 million, mostly reflecting the acquisition of Gyproc Benelux, a stronger Euro, a solid performance in the key French market and on-going growth in the developing markets of Spain and Italy. Operating profit declined 4% to £76.2 million, after charging £13.0 million of restructuring costs (up £7.2 million on the prior year) of which £7.1 million related to the Gyproc Benelux integration. Underlying operating performance was similar to last year but return on sales fell due to a modest contribution from Gyproc Benelux (pre restructuring costs) and the rapid sales growth of the lower-margin Iberian distribution business.


Results in France benefited from further growth in plasterboard volumes although input cost inflation and additional freight costs exceeded the improvement from better selling prices for core products. Plasterboard was imported from Belgium to meet both domestic demand growth and to enable the French operations to support additional Spanish demand prior to the Quinto upgrade.


Strong plasterboard penetration of the Spanish construction market continued, with particularly good growth in the commercial sector. A shortage of domestic capacity was exacerbated by the necessary upgrade of the Quinto plant and resulted in additional volumes being imported from France and Italy. Overall sales of building plasters were slightly higher but demand for added-value lightweight plasters continued to grow rapidly, and at the expense of more traditional products, with BPB investing substantially in its network of plaster plants. The group's Iberian distribution business performed well, contributing to accelerating demand for plasterboard systems.


Unfavourable domestic economic conditions restricted growth in demand for building plasters in Italy and resulted in a substantial decline in Portugal, although both markets experienced further volume growth of plasterboard systems.


Prior to restructuring costs, overall results from Benelux operations improved, with Belgium benefiting from intra-group exports of plasterboard from the new Kallo plant. Profitability was also affected by intense price competition for market share which followed the acquisition of Gyproc Benelux, and by cost inflation pressures. Actions were taken to put in place €9.0 million of annualised savings by the end of 2004/05. The social plan for restructuring the enlarged Belgian business was resolved in the second-half and will involve a significant reduction in the labour force over an 18 month period, together with the phasing out of production at the older Wijnegem plant ahead of its closure by March 2005.


Central & Eastern Europe
Turnover £330.8 million (up 14%); underlying operating profit £12.6 million (almost doubled)


Regional operating profit almost doubled to £12.6 million on turnover up 14% to £330.8 million, driven by strong growth in Eastern Europe for core products, generally better selling prices, and improved trading conditions in the Polish plasterboard market. The trading environment in Germany remained difficult and further actions were taken to improve performance.


German plasterboard volumes (which now represent less than 45% of regional sales) and average selling prices were both lower, although the second half saw some recovery in selling prices. Further actions were taken to deliver €10 million of annualised cost savings by March 2005 and to improve BPB's market positions in plasterboard, insulation and gypsum fibreboard. In addition the group disposed of the metal profiles business. The decline in plasterboard sales and input cost pressures offset the benefit of cost savings and manufacturing efficiencies.


A satisfactory performance was obtained in Austria, where plasterboard exports to Eastern Europe compensated for flat domestic demand, and substantial progress achieved in Switzerland which benefited from good volume growth of plasterboard systems and gypsum blocks.


Good volume growth of plasterboard and plasters in the developing Eastern European markets, together with better selling prices in Poland, drove improved regional profitability. In order to meet anticipated demand growth for plasterboard, construction of a new plant was commenced in Romania, alongside the group's existing plaster plant at Turda, with commissioning due in 2005. This additional capacity will significantly improve logistical costs and provide more cost-effective supply to the Ukraine where volumes are growing fast from a small base.


The Turkish plasters business was fully integrated following the minority buy-out during the year and a significant uplift in sales volume was achieved. In Greece plasterboard volumes increased as a result of construction activity ahead of the Olympics.


NORTH AMERICA
Turnover £488.8 million (up almost 7%); underlying operating profit £40.1 million (up 36%)


Underlying North American profits increased by 36% to £40.1 million, on turnover up almost 7% to £488.8 million, driven by strong demand from the new housing and renovation sectors, better US average selling prices in the second-half and significantly lower US restructuring costs. Despite higher input costs, mostly for US natural gas, the return on sales advanced by 1.8 percentage points to 8.2%.


Regional wallboard volumes grew 11% (8% on a like-for-like basis), driven by continuing strong demand in the US and Canadian residential and renovation sectors and by an additional month's contribution from the James Hardie Gypsum business acquired in 2002/03. Despite relatively weak commercial activity, the US wallboard market grew around 6% during calendar 2003 to approximately 32 billion square feet, representing over half the world's market.


Average realised US wallboard prices in the first half were marginally below $90 per thousand square feet, (corresponding period just over $90). However, subsequent selling price improvements were underpinned by higher industry utilisation levels and lifted the second-half average price to $97. Year-on-year, the average selling price improved 4% to $94, with the March price increase taking the year end and current spot rates to around $105 and $107 respectively. The improvement from increased selling prices was partially offset by annual cost inflation, principally natural gas which increased by over 10%. Towards the end of the year, new regulations restricting the working hours of drivers, together with higher activity levels, began to increase freight and bought-in material costs.


During the year the group launched GlasRoc (a glass reinforced gypsum wallboard product incorporating enhanced technology first developed by BPB in Europe) as an added-value system to meet growing demand for high-performance exterior sheathing applications.


BPB announced in February the completion of a long-term agreement with a power utility in North Carolina for the supply of desulphogypsum to a new 700 million square feet capacity wallboard plant at Roxboro to be commissioned in 2007. The new low-cost plant will meet expected sales volume growth and significantly strengthen BPB's market representation on the Eastern seaboard.


The benefit of a further good advance in Canadian wallboard volumes was mostly offset by input cost inflation and additional freight costs to service the strong growth in demand in Eastern markets.


The US ceilings business reported a further modest loss albeit, prior to restructuring costs, at a lower level and despite continuing weak commercial demand. A business recovery plan was initiated during the year, which involved the alignment of the US ceiling and wallboard management operations and the closure of the Pittston cast ceiling tile plant, and there are indications of improvement in certain commercial market segments.


REST OF THE WORLD
Turnover £108.6 million (up 18%); underlying operating profit £15.2 million (up 67%)


2003/04 saw significant progress in the profitable development of BPB's Rest of the World businesses, with underlying operating profits up by two-thirds to £15.2 million driven by overall plasterboard volume growth of 16% and improved selling prices. Regional sales margins advanced strongly from 9.8% to 14.0%, on turnover up 18% to £108.6 million. The regional improvement in results was driven by an excellent performance in Asia, where plasterboard volumes grew by over 30%, and a better outturn from South Africa. To meet the continuing strong Asian demand, BPB is progressing an investment plan to expand capacity in Thailand and India, build a new Malaysian plant, and further develop the Indian building plasters market.


The Brazilian business recovered to almost break-even by the year end, benefiting from improved plasterboard selling prices on stabilised volumes despite a weak economy.


Better selling prices of building plaster in Egypt offset the impact of a reduction in volumes due to a weaker construction market.


In South Africa, further plasterboard volume growth was driven by strong demand in the residential sector and contributed to a substantially better performance despite higher input costs and some selling price pressures.


Strong Thai domestic demand and export sales led to good growth in profitability and cash generation, despite increasing competition from plasterboard imports in the second half. Further actions were taken to improve the operating efficiency of the low-cost plant at Laem Chabang and a second plasterboard line is now due to be commissioned in 2005.


A new plasterboard plant is also under construction near Kuala Lumpur and will come on-stream in early 2006, to support growing demand in the Malaysian peninsula where BPB is currently under-represented.


Strong economic growth continued to stimulate construction activity in China, leading to further rapid development of the plasterboard market which has already reached around 300 million square metres. Although competition is intense, with a large number of producers selling products of differing quality and price, BPB has now established a leading position as a premium systems manufacturer providing consistent product performances and high levels of customer service. Good volume progression was achieved during the year, with the business now operating at close to break-even.


Demand for plasterboard ceiling and partition systems in India, and for modern one-coat building plasters, increased substantially due to further product penetration against traditional building materials and an active commercial construction sector buoyed by a fast-growing economy. This led to an improved performance despite additional competitive pressures on selling prices. Work has commenced near Mumbai on the construction of a new plasterboard plant and the expansion of building plaster capacity, expected to come on-stream by the end of 2005 to strengthen BPB's all-India manufacturing and distribution infrastructure and meet future demand growth.


OUTLOOK


The current year has started well as expected, due to the continuation of the strong trading momentum of the previous year's second half, with positive trends in sales volumes and pricing levels being sustained in the group's key markets. Although parts of the European economy are still somewhat subdued and commodity costs are rising worldwide, the Board is confident that BPB will deliver further progress this year.


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