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Introduction |
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Financial highlights |
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Routes to market |
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Chairman’s statement |
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Chief executive’s review |
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Operating review |
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Finance director’s review |
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Directors |
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For a printer friendly version of this Annual Report website plus PDFs of the rest of the document please visit the PDF download section . |
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Dear fellow shareholder
In the first year of the new millennium it is pleasing to report that your company earned record profits. That it did so was largely due to selling more products at better margins and being more efficient. It is most appropriate, therefore, to begin this year’s statement with a tribute on your behalf to all our employees for their considerable achievement in securing this substantial uplift in performance.
Results for the year
The company enjoyed a year of good market demand for its products in most regions with an outstandingly good year in North America. On cost reduction our targets for the year were exceeded and, despite the emergence of areas of strong cost inflation during the second half, underlying pre-tax profit rose by 23% to a record £224.1 million. Underlying earnings per share, enhanced by the buy-back programme, rose a very creditable 32% to 31.5p.
Reported pre-tax profit increased by £63.3 million to £225.6 million, a 39% improvement on the prior year, which was affected by a net exceptional charge of almost £20 million.
Business development
Much has been achieved this year, especially in terms of building our growth platform for the future. The regional re-organisation has bedded down well, including the integration of BPB Gyproc, although much still remains to be done.
Likewise the operational efficiency and benchmarking programmes are now well established, have delivered tangible results for the year and promise more for the future. The company’s new plasterboard plants in Poland and the Czech Republic are performing well and our acquisition of 70.75% of Thai Gypsum Products, the first business to successfully complete Thailand’s new financial reconstruction process, has established us in a substantial way in the strategically important south east Asia region.
Since the year end we have also extended our European product offering with the acquisition of a German-based manufacturer of expanded polystyrene insulation products, which builds on our existing leadership position in France.
Potentially the most significant development is the agreement we have reached today to secure one of our key strategic objectives in gaining a direct stake in the US internal linings market, the largest in the world. This is being achieved through the acquisition for US$345 million of the wallboard and ceiling tile businesses of Celotex Corporation. When added to the existing sales of our Canadian subsidiary, this will make us the fourth largest wallboard producer in North America with an 8 to 9% share of the market, and give us 10% in ceiling tiles.
Shareholder value
Last year was another year in which we made good progress in our drive to deliver improved shareholder value.
Dealing first with the dividend. Given the strong financial performance, the Board recommends a final dividend of 8.25p per share making a total dividend for the year of 12.5p, an increase on the previous year of just over 8%.
Secondly, action was taken to further strengthen the company’s balance sheet by issuing a €400 million 10 year bond at a competitive interest rate. The long term nature of this bond, and the group’s continuing strong free cash flow, provide much increased financial flexibility as we pursue acquisitions in furtherance of our growth aims.
Our strong cash flow also enabled us to take advantage of the authority you granted to buy back shares and during the year we spent nearly £70 million on this programme, the effect of which on a full year basis will increase earnings per share by an estimated 3%. In the last two years the company has returned almost £170 million to shareholders and bondholders via buy-backs and repurchases. We shall seek a renewal of a share buy-back authority at the forthcoming AGM, but at present have no firm plans to utilise it.
Leadership
1999/00 has been a very active and positive period of change at the top of your company. The process began with David Leonard’s appointment as chief executive on 1 February 1999 to run the group until a younger long-term successor could be found. As the results in this annual report show, better than any words, David and his team have delivered an excellent performance and considerably strengthened the platform to take the business forward. Despite his short tenure as chief executive due to his impending retirement, David gave an unstinting commitment to the business, an approach which has characterised his decade of service at BPB. We are all immensely grateful to him and look forward to his contribution on the Board as a non-executive colleague.
Our new chief executive, Richard Cousins, took up his position on 1 April and he has been joined on the Board from 3 May by Jean-Pierre Clavel, Mark Higson and Paul Withers as executive directors. Their biographies are shown on pages 20 and 21 and their respective roles are covered in the chief executive’s review. Our executive team is young, energetic but also experienced, and I look forward very much to working with all of them. The team is focused on growth, cost reduction and people development, which are the foundations from which we seek to deliver shareholder value.
Mike Dowdall has reached the age of 70 and will not be seeking re-election at the AGM. Mike has served as a non-executive director since 1991 and made a valuable contribution to the company’s business. Both his counsel and his companionship will be much missed.
I am delighted to have this opportunity of welcoming to your Board Lady Balfour of Burleigh as a non-executive director. Her brief biography on page 20 understates considerably her abilities and achievements, and we very much look forward to her contribution to the Board’s deliberations.
Future
Your company is an international business and is positioned to become still more so; in that context predicting future economic trends and their impact on our growing and diverse spread of markets is more difficult.
For our major markets, this year we judge that our core European businesses will continue to strengthen but at a more modest pace and that North America will, as previously predicted, slow down. The trend of cost inflation on energy and raw materials is of greater concern than twelve months ago but our philosophy of permanent cost reduction will deliver further efficiencies. We therefore expect the current year to be one of progress, boosted by our recent acquisitions, but the strength of sterling against the euro, if maintained, will adversely affect the final outcome.
Allan Gormly
1 June 2000
Return on shareholders’ funds annualised %
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