The Investment Column: BPB in good shape as concerns over Brussels inquiry recede

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The Independent Online
DAVID LEONARD, chief executive at BPB, is enjoying his unexpected tenure at the helm of the world's largest producer of gypsum products.

Deferring his retirement for a year, he took on the role in February when his predecessor, Jean-Pierre Cuny, stepped aside after the European Commission launched a probe into alleged price-fixing.

Once in the hot seat, Mr Leonard reinvigorated the plasterboard group while pruning costs. Investors have responded, pushing BPB shares from less than 200p at the start of the year to almost twice that.

BPB looked in good shape yesterday, with half-year profits up by 27 per cent to pounds 114m, before exceptionals. Margins rose a chunky three points to 16.3 per cent.

The good fortune stems from a benign combination of lower costs, a pick- up in European volumes and stronger prices and volumes from North American operations. Analysts applaud a headcount reduction of 5 per cent - a central feature of a drive to remove pounds 20m a year from the cost base - although a cynic might wonder why such action eluded Mr Leonard when he was chief operating officer.

BPB's core businesses are doing well, with like-for-like global plasterboard sales up by 13 per cent in the half. European sales, which account for 80 per cent of group activity, gained in most regions of the Continent, although prices were steady to marginally lower. In the rest of the world, turnover gained by one-third and operating profit by 130 per cent, with factories in Canada working flat out.

The outlook for the second half is less positive, although far from gloomy. Margins in North America will slip as new capacity comes on stream, while European prices appear solid enough. The wild card of the EC investigation remains, but analysts do not envisage more than a slap on the wrist, at worst.

Analysts foresee full-year earnings of pounds 220m, putting the shares - down 11.75p yesterday to 345p - on a forward price/earnings multiple of less than 12. Mr Leonard, who will step down in 2000, has done well and investors could see the shares move closer towards the 400p mark.