Chairman's Interim Statement
I am pleased to report that, after last year's disappointing result, pre-tax profit
for the half year ended 31 March 2003 recovered sharply against the comparable
period last year. Further progress is expected in the full year.
Financial Review
In what is, for seasonal reasons, traditionally the weaker half of the financial
year to 30 September, pre-tax profit increased from £833,000 to £1,824,000 and
earnings per share improved from 1.42p to 3.12p. This represents increases of
119% and 120% respectively.
Turnover increased by 9% from £21.2m to £23.1m while operating profit improved
from £1,025,000 to £1,977,000.
With net debt reducing from £7.4m a year ago to £5.8m, period end gearing of 11%
compared with 14% a year previously.
Equity shareholders' funds amounts to £53.2m, representing 129p per share.
Dividend
The Board has declared an unchanged interim dividend of 1p per share, payable
on 13th August 2003 to shareholders on the register at close of business on 11th
July 2003 (record date).
Business Review
In the half year, operating profit from Building Materials increased by 255% from
£522,000 to £1,851,000 on turnover up 11% from £20.6m to £22.8m. This represented
94% (2002: 51%) of total operating profit and 99% (2002: 97%) of total turnover.
This much improved result represents a significant recovery from the first half
of 2002 which was adversely affected by a combination of an increase in the commercial
price of gas and by disruption to production at those factories where work was
being carried out to accommodate an increased demand for moulded stock bricks.
The increase in turnover reflected an 8% increase in despatches generated by demand
from the housing market for bricks from our Hartlebury 2 and Waresley factories.
There were increases in demand for both moulded stock and extruded wirecut bricks
together with some firming in prices, following a further fall in the national
stock of bricks.
Our innovative Corium brick cladding product continues to stimulate interest in
the costruction industry following the completion of several small-scale new build
and refurbishment projects.
Baggeridge's Landsource business principally comprises the sale of air space to
waste management companies. Following completion of the latest phase at Himley,
activity is currently restricted to the quarry at Waresley.
In the half year, Landsource reported an operating profit of £126,000 (2002: £503,000)
on a turnover of £232,000 (2002: £607,000). This reduced level of activity has
been flagged for some time and reflects the cessation of revenues from the current
phase at Himley and the ending of income from the initial contract at our Kingsbury
site.
Landsource revenues are likely to remain modest until new agreements are in place
for current voids at both Himley and Kingsbury. Nevertheless, we are continuing
to create air space and this remains a valuable long-term asset.
Board
During the half year, as has already been announced, there were a number of changes
to Board membership and responsibilities.
At the AGM in February, Alan Grieve retired, having reached the Company retirement
age of 75. I intend to pay tribute to Alan in the full year report. I was delighted
to welcome Rupert Soames to the Board in January this year. As a non-executive
director Rupert will bring a wealth of industrial experience to Baggeridge, having
been CEO of the Banking and Securities Division of Misys PLC and, prior to that,
Managing Director of Avery Berkel UK Limited.
Prospects
Despite indications that the substantial growth in house prices, particularly
in the South East, might have come to an end, private housing starts have begun
the calendar year strongly with a 12% increase in the first two months. Bearing
in mind the Midlands bias of the business, the acknowledged housing undersupply
and the low interest rate environment, prospects for the Company remain sound.
The Board is confident of achieving further progress in the full year.
Alexander Ward
Chairman
14 May 2003