Chairman's Interim Statement

Although turnover of £21,244,000 for the half year ended 31st March 2002 was 11 per cent higher than the same period last year, before tax reduced to £833,000 from £1,544,000, giving earnings per share of 1.42 pence against 2.64 pence last year.

Operating profit was £1,025,000 compared to £1,750,000 last year. The largest reversal came in the building materials division where the operating profit for the half year was £522,000 compared to £1,120,000. The increase in the commercial price of gas has added significantly to our costs and at this stage, as indicated in our recent trading statement, it has not been possible to pass all of this on to customers in higher prices. However, the improvement in demand that we saw in the second half of our last financial year has been maintained and this resulted in despatches for the half year being 8 per cent ahead of the corresponding months last year.

The increased demand for moulded stock bricks, at the expense of wirecut extruded bricks, has continued. Whilst we anticipated this trend and are presently refocusing the business to align our production capability to match this shift in demand we are experiencing some disruption at those plants where production is either being converted to this type of brick or volumes enhanced. At Rudgwick, manufacturing difficulties have so far thwarted efforts to raise production volumes but a new management team has been installed and these problems are being resolved. At Waresley, where early demand for our enhanced range of moulded bricks has been very encouraging, further capital expenditure in excess of £1 million has been committed to enable these products to be made in greater volume and, hence, more efficiently. This scheme will be completed by early 2003. Although there is always some delay in the market acceptance of new products, demand for a new range of yellow stock bricks from Sedgley has so far proved disappointing. However, reaction to further product development is promising. We still believe our strategy is right in relation to this factory and our overall positioning in relation to moulded products.

In contrast, our two Hartlebury factories and those at Kingsbury have shown an improved performance and sales trends are generally positive. The improvement at Kingsbury in part reflects a substantial increase in the volume of paving sold into the consumer market following our promotion campaign, launched last year, under the "Origins" brand.

The Landsource division saw operating profit reduce to £503,000 from £630,000. This was as expected and, as stated in last year's annual report, our active Himley landfill site is nearing completion. There will be a delay before tipping recommences at our nearby new workings.

I am pleased to report that our first commercial brick cladding contract, under the "Corium" brand, has now been completed. Interest in the system is very high and in March it was a joint winner in the Research & Development category of the prestigious "Quality in Construction Awards 2002", the judges being especially complimentary in respect of its innovative design.

Whilst the remainder of the financial year will be difficult there are a number of encouraging signs. Activity levels improved in March and, following years of decline in house building in this country, housing starts for the first three months of 2002 were 9 per cent higher than the same period last year. Furthermore, despite the present low activity levels within the industry the national stock of bricks continues to fall, there being a reduction of 7 per cent over the twelve months to the end of March. As stocks come further into balance it should be possible to improve prices and recover much of the cost increases that the industry, to date, has had to bear.

We have a strong balance sheet with net assets per share, at 31st March 2002, of £1.27 and limited borrowings with gearing at 14 per cent at the period end.

The Directors have agreed to the payment of an unchanged dividend of 1.0 pence (2001: 1.0 pence) per share. This will be payable on 7th August 2002 to shareholders on the register at the close of business on 12th July 2002 and represents a cost of £410,000 (2001: £410,000).

My father, Peter Ward, stepped down as Chairman in January and retired from the Board at the Annual General Meeting in February. I am pleased that he has agreed to succeed the Earl of Dudley as President and I intend to pay tribute to his contribution to the Company in my statement at the end of the year.


Alexander Ward
Chairman
May 2002