By Roger Trapp

The first thing you notice when you visit the headquarters of the chemicals company Laporte in London's West End is the art. Pictures are everywhere - in the reception area, the stairwells, the photocopying rooms, even the lavatories. But this prize-winning collection of more than 100 works is not another example of corporate excess. There is a point to it, beyond covering the walls of the minimalist modern building which the company moved into in 1998.

The first thing you notice when you visit the headquarters of the chemicals company Laporte in London's West End is the art. Pictures are everywhere - in the reception area, the stairwells, the photocopying rooms, even the lavatories. But this prize-winning collection of more than 100 works is not another example of corporate excess. There is a point to it, beyond covering the walls of the minimalist modern building which the company moved into in 1998.

For a start, Laporte has a connection with art because it manufactures chemicals used in the production of paint. Second, the pictures were chosen to illustrate the development of British art over the life of the company. Finally, it shows the careful husbandry instituted in the five years since Jim Leng took over as chief executive. The works have been bought with the proceeds of selling the LS Lowry picture, Industrial Landscape, that hung in the company's previous London base, in Bedford Square.

Similarly, Mr Leng, an engaging North-easterner who arrived at Laporte after running the Scottish-based packaging group Low & Bonar, has tried to reposition the company as an innovative specialty chemicals group through a series of disposals and acquisitions. And, he says proudly: "We haven't asked shareholders for a penny."

As a result, group turnover is just about the same as when he took over - nudging £1bn - but profits are much stronger. Earnings slipped last year, to £132.4m, from the previous year's £134m. But they are still substantially ahead of the £110m when he joined the company. More importantly, margins have been pushed up from about 11 per cent to 17 per cent.

This last aspect has particularly impressed market watchers. Analysts at Morgan Stanley Dean Witter say the performance puts Laporte at the leading edge of chemical companies. Though there has been criticism that it has not grown very swiftly, one of the team says that the group "in general has a very good portfolio".

But the problem is that chemicals companies, in common with many manufacturers, are not highly valued. So the improvements in the company cannot be seen in the share price. After a spurt on the back of bid talks, believed to be with Switzerland's Clariant last year, it is back in the doldrums, despite repeated bid rumours. And, as Mr Leng points out, there is no meaningful long-term incentive plan for executives.

Indeed, it is an indication of the lack of interest in the beleaguered chemicals sector that - highly respected for this performance as he is - Mr Leng is probably best known for his decision just before Easter to resign after just three months as a non-executive director of Stagecoach, the transport group headed by Brian Souter. There has been speculation that the two clashed about how the company was run. But Mr Leng will not go into details, other than to say that "there were issues" stemming from "core beliefs".

What he will not stop talking about, though, is Laporte. Granted, some of his enthusiasm may stem from the fact that last year he was paid a total of £959,000 for his efforts. When he arrived at Laporte in October 1995, after 11 years at Low & Bonar, he knew there was a lot to do. What he had not reckoned on was having to make a profits warning within the space of a few weeks.

Yet even this he turned into a positive experience. "It does concentrate the mind and gives an urgency to change," he says. "When you're a chief executive coming to a new job you'll want to do something. A thing like that gives you a 'turbo-boost'."

Mr Leng's predecessor, Ken Minton, had done much to transform the company from a commodity to speciality chemicals producer, but there had been limited progress in integrating and rationalising the wide range of activities resulting from the acquisition of 110 businesses in the previous 10 years.

In addition, there were financial problems stemming from the need to develop these operations, and the systems of management and control were in danger of breaking down.

"We were spread so thinly," says Mr Leng. "Some businesses weren't doing very well, but were using cash. Others were great businesses, but were short of cash." His response was an immediate and wide-ranging strategic review. It was designed to sort out which parts of the business had the potential to be produce sustainable high growth, what businesses had high barriers to entry and which would generate cash. In addition, he and his colleagues assessed which had the potential to be global rather than just local businesses.

Once those questions were answered, they moved on to deciding what to do about businesses which did not fit within those parameters and how to support those that were left. From this, Mr Leng set out his strategy of making Laporte into a "solution provider".

He says: "We didn't want to be a 'converter of raw materials'. We wanted the business of Laporte to be as a solver of customers' complex problems." It is here that Mr Leng gets especially animated. "We've got products you wouldn't believe. Some of these life-saving drugs rely on companies like us," he says in a riposte to those who believe chemicals is a long way removed from the new-technology businesses that are so popular with investors.

"If you drop your contact lens, the blue tint that helps you find it is ours. We make artificial lubricants that can withstand great pressure," he says, adding that Laporte is behind the technology that prolongs the fizz in soft drinks, helps to maintain the coloured stripes in toothpaste, puts the black ink on dollar bills and makes the supportive foam for fashionable trainers.

This renewed emphasis led to a spate of what Mr Leng calls "acquiring with focus". But, conscious of the current mantra of enhancing shareholder value, all the deals were financed out of disposals. One deal, the 1997 purchase of the specialty organics business Inspec, has come in for some criticism because of the interest payments that demanded.

But, Mr Leng says, the deal actually cost £500m because of accounting technicalities. And he insists it has given the company "a very vibrant strong centre that didn't exist before".

Transforming the fortunes of Laporte has been about much more than buying and selling businesses. "We bought nothing for 30 months," says Mr Leng. "For the first time in 20 years we did not buy a thing."

Instead, he threw himself into the less glamorous aspect of a chief executive's role. "There was a tremendous amount of work just making sure the organisation was appropriate to the new business," he says. A fundamental part of this was making the management of the business more global. Similar operations in different countries were brought together under global product managers, research and development was organised on a worldwide basis - all with the aim of serving global customers.

There was also a re-examination of the role of head office, or the centre. This led to those with operational responsibilities being transferred to the relevant businesses and a pared-down central staff moving out of the longstanding Luton base and a London office into a single premises covering two floors of a new building in the West End. Along the way, the workforce has been reduced from 7,400 to 5,200.

As the City's high rating of his performance illustrates, there can be little doubt that Mr Leng has made Laporte highly competitive. It's not a bad performance for a man who drifted into business at the age of 20 after dabbling with chartered accountancy articles instead of going to university. Picked out for management training while in his first post in his native North-east, he flitted between various parts of the John Waddington games and packaging operation which he joined at 20.

At one time he ran the Subbuteo table football game operation, at another a greetings card company. But there was always time for badminton. He believes playing sport is a good way to meet people if you are moving around a lot. While he was playing for Durham he met his wife, Carole.

The moving continued when he joined Low & Bonar in 1984. But even at this stage he insists that there was no grand plan. "I've been lucky. It's not all strategy," he says.

But fortune has deserted him in one area. Laporte, in common with other manufacturers with significant exports, has been hard-hit by the strength of sterling. Though he claims it is not in his nature to point to factors beyond his control, Mr Leng says when he arrived at Laporte the pound was worth DM2.25. Now the exchange rate is DM3.25.

"Profits have never gone south," he says. "We've got returns out of the business that make us globally in the top quartile in spite of the issue of the pound." He believes improvements in industrial relations since his early days in business had played a key role in making up for the disadvantage.

Nevertheless, the company estimates that since the end of 1995 the strong pound has cost it almost £60m in lost profits, with £22m of that in 1999 alone.

One response has been a change in procurement policies, and Mr Leng says he is mulling other strategies for dealing with the pound and the general lack of appreciation of stock markets around the world of companies such as Laporte. "You have to look upon it as another challenge," he says. At the heart of any approach is bound to be innovation. And not just in the laboratories.

Mr Leng is proud of how the company last summer came up with a novel way to use surplus advance corporation tax instead of an interim dividend payment to distribute earnings to investors.

He claims to still be enjoying the role and relishes the chance to go through the further inevitable changes if the company is to remain on track. But he is as aware as anybody that all the good work must be making the company a more attractive takeover target.

As the Morgan Stanley team points out, smaller companies that are well-managed but under-valued are bound to be the subject of bid rumours. They add: "It's certainly at the top of the list."