Investment Column: Plasterboard business looks sturdy

Alterian - a tiddler worth the catch; Uniq recipe needs longer to cook
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The Independent Online

There are not many industries left where Britain is the world leader but plasterboard is one of them.

There are not many industries left where Britain is the world leader but plasterboard is one of them.

To underline its global reach, BPB yesterday moved to buy out minority shareholders in its operations in India and Thailand. That seems pretty sensible because the take-up of plasterboard in emerging markets is roaring ahead.

Although plasterboard as a building material has been around since the 1950s, its usage continues to increase, even in Europe, where it outstrips GDP growth by some 3 per cent. The material is lighter than bricks and it can provide other qualities, such as fire and sound proofing.

The US market is pretty mature, but elsewhere BPB can reasonably claim to be a growth story.

Last week the company reported healthy full-year results. Turnover was up 12 per cent and underlying pre-tax profit was 16 per cent higher.

The company has decided to focus on its core plasterboard and plaster markets, leaving other building materials.

Even though it already has 20 per cent of the world market and is active in 50 countries, BPB has also decided to go more aggressively for expansion into new markets, including the new accession countries in the European Union. Furthermore, the US is doing better now, with greater demand and higher prices as a result of the booming housing market there.

BPB is building five new plants in what is a significant step-up in its capital investment plans.

The company points to the level of product penetration in North America, to show what may be possible elsewhere. In North America, usage of plasterboard is 10 square metres per head. That compares with 3 square metres in Europe and less than 1 square metre in much of the rest of the world.

We advised shareholders to buy BPB shares at 281p in March last year. Even at yesterday's 371p, you should continue to buy.

Alterian - a tiddler worth the catch

Alterian is a technology tiddler but a reassuring set of annual results for the year to the end of March puts them in the bracket of new companies likely to stay the course.

Floated in 2000 at the end of the technology boom, the company stuck to its guns to build a software business used by the marketing departments of companies such as Orange, Lloyds TSB and Heinz. Revenues rose from £4.8m to £5.7m and pre-tax losses fell from £6m to £3.2m. The final quarter showed a revenue increase of 28 per cent, suggesting there is plenty of momentum in the business.

Alterian's software mines companies' databases for sales opportunities. The clever bit of its business model is that Alterian sells its systems through third parties such as Saatchi & Saatchi and Experian. These companies buy a licence to use Alterian software then apply it to solve their clients' problems. Every time they win a project that uses Alterian software, then Alterian gets a second, royalty-type payment. The company is heading rapidly towards profitability. Buy.

Uniq recipe needs longer to cook

Uniq, the rump of the old Unigate business, is not alone in finding the going tough in the UK. Wm Morrison's takeover of Safeway has left suppliers' profit margins - squeezed at the best of times - looking flatter than a used tube of toothpaste.

When you add in the impact of rising raw material prices and too many companies chasing the same bread and butter via supplying the convenience foods that are reshaping our lives, you get a recipe for slower growth across the sector.

But Uniq is finding life singularly difficult thanks to some issues of its own making. Too much focus inward last year, which saw it sell off its poultry products business among other initiatives, cost it some key contracts with customers such as J Sainsbury. The result was UK profits fell by 20 per cent in the second half, after more than doubling in the first half.

Yesterday the group said it would shut two plants in the UK, with the loss of some 550 jobs, and transfer some of its German production to Poland, as part of an attempt to overhaul its supply chain. It will take a £25m cash restructuring charge to cover the move, while spreading the anticipated £25m capital expenditure over the next two years. The upside will be £17m in cost savings per year - although these will take 12 months to feed through.

The group made a pre-tax loss of £15.6m last year, although this was after some £40m relating to goodwill and exceptional items. Excluding these, pre-tax profits were 7 per cent lower at £24.7m.

Although Uniq is a tasty business, its chief executive, Bill Ronald, needs a little longer to cook up a convincing investment proposition. Hold.

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