Watts,Blake,Bearne - Final Results

RNS No 6710u
WATTS BLAKE BEARNE & CO PLC
7th April 1998
                               
                  WATTS BLAKE BEARNE & CO PLC
                               
                   1997 PRELIMINARY RESULTS
                               
                               
                               1997          1996              
                                                 
Sales                       #98.74m      #102.93m         -4.1%
Operating profit            #12.94m       #12.18m         +6.2%
Pre-tax profit              #11.64m       #10.71m         +8.7%
Earnings per share            33.5p         29.1p        +15.1%
Full Year Dividend            17.6p         16.2p         +8.6%
                               

        Watts Blake Bearne, world leader in Ball Clays
                               
 Increases profitability substantially in spite of Sterling's
                           strength
                               
                               
*  Record profit for Group and three major operating Divisions

*  Operating margin improves from 11.8% to 13.1%

*  Major strategic mineral reserves acquired in Germany

*  New joint venture established in China

*  Excellent reception to loan note issue: US $55m received in
1998

*  Final Dividend increased by 11.9%

Enquiries:

Dr. Graham Lawson, Chief Executive
Dr. Michael Young, Finance Director
Tel: [phone] until 12:30 pm; thereafter 01626 332 345

Editor's Note:

Watts Blake Bearne ("WBB") is a leading international clay
producer, whose operations in the UK, Germany, Europe, the USA
and the Asia-Pacific region specialise in the supply of ball
clays, kaolins and prepared ceramic bodies to the ceramics and
other industries worldwide.

Ball Clay is a relatively rare mineral, but is an important
white-firing plastic component in ceramics such as
sanitaryware, tiles and tableware.
                                                               
                                                               
                               
                               
                   PRELIMINARY ANNOUNCEMENT
Extracts from Chairman's Statement and Chief Executive's Review
                         of Operations

Financial Performance

In a most difficult year from the viewpoint of foreign currency
parities we are pleased  to report record profits for WBB in
1997.  Indeed, profit before taxation of #11.6m reflects an
increase of 8.7% over the previous year and an improved
operating margin of 13.1% (1996: 11.8%).  Had the previous
year's exchange rates applied, our turnover would have recorded
a 4.0% increase and pre-tax profit a 17.4% increase to #12.6m.
Earnings per share increased by 15.1% to 33.5p (1996: 29.1p).
The Board is recommending a final dividend of 13.2p bringing
the total dividend for the year to 17.6p (1996: 16.2p), an
increase of 8.6%.  Dividend cover is increased to 1.9 times
earnings.  The main factors which influenced our result in 1997
are continued progress by management in executing its cost
management programme and improvements in the Group's important
European markets.

We have continued our strategic drive to secure the best
mineral reserves and to expand the business geographically.
Toward the end of the year we acquired further important clay
deposits in Germany.  These clays are much sought after by the
tile industries in Germany and Italy and this acquisition will
further strengthen our position in these important markets.
The first payment of the consideration was made from cash
resources; the second and final instalment, due in December
1998, will be funded by cash flow and external financial
resources.

Our important, but modest, investment in Asia-Pacific has
inevitably been affected by the economic crisis in that region
and its impact on currency values.  We remain convinced,
however, that this highly populated and important region will
regenerate after a period of discomfort and we intend to
support our existing investments there and develop new ones.
The new joint venture recently concluded in China is a good
example.  Notwithstanding our confidence in the long term, we
put great emphasis on stewardship and our activities in the
region and our investments there are closely monitored and
reported regularly at Group Board level.

Our results have also benefited from a lower effective tax rate
of 38% compared to 43% the previous year.  The main reasons for
the reduction in 1997 are the reduced rate of corporation tax
in the UK (from which we benefited by 1.5%), lower unrelieved
losses in our developing Pacific Clays Division and a higher
level of repatriation of dividends from Germany (resulting in a
lower applicable rate in that country).

The Company's balance sheet, already strong, has been further
strengthened.  In February this year we successfully concluded
an issue of unsecured loan notes using the US  private
placement market raising $55m with a 10-year maturity.  We have
applied approximately $42m in repaying existing debt and have
invested the balance pending further acquisitions and capital
projects.  The funds have been obtained at fine margins over
historically low interest rates.

Trading Operations

In 1997, our three largest Divisions, namely Devon Clays,
German Division and Ceramic Body Division, each achieved record
profits when expressed in their local currencies.  This was
also the case for our Ukrainian venture, Donbas Clays, which
forms the core of our new Eastern Europe Division established
in January 1998.

Devon Clays

Despite tougher conditions, particularly in export markets in
which the continuing strength of Sterling severely impacted our
ability to secure price increases, Devon Clays achieved a
record profit performance.  A fine team effort!  The main focus
of this flagship Division continues to be the ceramics industry
world-wide, with 78% of the ball and china clay output from
Devon being exported.  Sales volumes in both home and export
markets were ahead of last year with each at record levels.
Divisional turnover of #46.9m was slightly lower than last year
owing to a changed product mix and the strength of Sterling
which constrained price improvements.  The determination to
achieve year-on-year operating cost efficiencies meant that the
Division reached an enhanced level of profitability; margins
improved significantly.

Whilst most of Devon Clays' sales were to its core ceramic
customers, there was an excellent increase of 62% in sales to
non-ceramic markets in the UK and overseas.  This has been
achieved through the Division's new Industrial Minerals
Department formed in 1997.  We intend to support this
initiative further in the coming year with additional resources
for sales and research and development on the basis of the good
growth prospects we have identified.

Major investments have been made to expand the range of
products and processing facilities in Devon.  The new #3.2m
grinding and packaging plant at our East Golds site, which is
housed in the largest single-span building in the West of
England, became fully operational during 1997 and a further #1m
was invested to automate the shredded clay and refined clay
packaging plants.

Following a full environmental assessment, our proposal to
extend Southacre Quarry, the largest ball clay production site
in the United Kingdom, received approval from the District and
County Mineral Planning Authorities.  Despite wide consultation
with all relevant parties, before the planning permission could
be formally granted, an area of our site was illegally occupied
by protesters objecting to our explicitly stated need to divert
a section of two adjacent rivers.  This resulted in the plans
being referred by the Department of the Environment for Public
Enquiry which will take place in July 1998.  We can see no
reason why our proposals should be rejected on technical or
environmental grounds.  This is especially so as the area
concerned is within the Ball Clay Consultation Area designated
by National Government to prevent sterilisation of the land by
any use other than the extraction of clay minerals.

Germany

Although construction activity in Germany declined by 3% in
1997, our German businesses managed to maintain their share of
the home market and increase their share of the export market.
An overall increase of 4% in sales was achieved in the face of
intense competition and a resulting downward pressure on
prices, particularly in the important Italian market.  Effort
on sales was complemented by continuation of the cost
management programme started the previous year.  Increased
operational efficiency and overhead savings resulted in a
considerable profit improvement over 1996, for which our
colleagues in Germany deserve congratulation.

We have already referred to the purchase, in December, of
substantial mineral reserves in the vicinity of Siershahn in
the Westerwald.  These important and rare reserves, known as
Unnerwald and Berggarten, will yield certain types of high
quality clays ideally suited to the more sophisticated
technology applied in modern tile manufacture, well into the
next millennium.

North America

The fortunes for United Clays were mixed during 1997.  The
first quarter of the year witnessed record sales to the tile
and sanitaryware markets although our production costs were
higher due to the exceptionally wet weather at that time.  The
customer ordering profile in North America, including Mexico,
became more erratic from the second quarter, although results
remained above plan at the end of the first half-year.  During
the second half-year softening of the tile and sanitaryware
markets became all too apparent and the profit for the year as
a whole turned out little different from 1996.  Throughout the
year both shipments and costs were threatened by severe
railroad problems.  We are actively pursuing solutions with the
relevant railroad companies.

Ceramic Bodies

In May 1997, our prepared ceramic body businesses, namely WBB
Cerapasta (Portugal), WBB Vingerling (The Netherlands), and WBB
Fuchs-Keramische Massen (Germany), were brought together for
management purposes into a single operating Division.  We are
delighted to report that in comparison with the aggregate
results of the three companies in 1996, profits have increased
some 19% even measured in Sterling terms.  This increase
confirms our belief that synergies could be realised between
the business units.  It is also evident that our efforts to
streamline processes are proving to be effective.

The fortunes of each of the constituent parts of the Ceramic
Body Division varied.  The German business suffered a small
decline in sales volumes due mainly to the continuing
concentration of the German ceramics industry, although this
was mitigated to some extent by new accounts in the export
markets of Eastern Europe and the Middle East.  Cerapasta, in
contrast, enjoyed a continuation of the sales growth it has
achieved over a number of years in its home market,
nothwithstanding increased local competition.  Vingerling's
home sales mirrored the slow decline of the Dutch ceramic
industry, but this reduction was more than compensated by
growth in exports.  In each case - and most especially in
Holland and Germany - tight cost control resulted in
substantial improvements in profitability.

Early in 1998, a small ceramic body business, Continental
Ceramic Services (CCS), was acquired from the Sibelco Group and
absorbed into Vingerling.  We believe that this will serve to
consolidate further our market position .

Asia-Pacific

WBB confirmed its position as a leading producer and supplier
of high quality ball clay in the Asia-Pacific region with the
announcement late in 1997 of the formation of WBB Jianbei
Ceramic Minerals Company Limited in China.  This new venture
will produce blended and noodled ball clay products from a
number of deposits in the Qingyuan area in Guangdong Province,
southern China.  WBB's Chinese partner in the venture, Jianbei
(Group) Company Limited is already engaged in the manufacture
of ceramics in China.

The new operation will concentrate on producing clay blends
specially formulated for use in the manufacture of vitreous
china sanitaryware and electrical porcelain.  Production
capacity of the operation is planned initially to be 100,000
tonnes per year.  Commissioning is expected to be completed by
mid-1998.

During the second half of 1997, the Asia-Pacific region started
to suffer significant market instability and most of the
region's currencies were heavily devalued.  After 10 years of
sustained high GDP growth, most countries in the region are
expecting near-recessionary conditions in 1998, although many
commentators believe that growth will be restored by the end of
the century.  This economic setback will slow the growth of
Pacific Clays Division, but we are very confident that the
dynamism and market growth that drew us to invest in the region
will return and we remain committed to establishing a major
long-term profitable presence in Asia.

Despite the economic turmoil, both WBB Clayindo, our joint
venture in Indonesia, and our associated company Claymin in
Thailand, made good progress in 1997.  The Indonesian ceramic
industry continued to expand in the first half-year and
domestic sales growth enabled WBB Clayindo to break even.
Although market conditions are now more difficult, the
devaluation of local currencies relative to the US$ is creating
significant export interest.  This venture is based on first-
rate clays from Kalimantan which are capable of being used in
the production of both tiles and sanitaryware in local and
regional markets.

Market conditions in Thailand also deteriorated during the
second half-year, but our Thai joint venture produced strong
sales growth showing a 15% increase over 1996.  Overall margins
were also higher and pre-tax profit rose by 50%.  Performance
will, inevitably, be affected by the developing recession in
Thailand and it will be very difficult to replicate their
financial success of 1997 in the current year.

Eastern Europe

Our activities in Eastern Europe have been constituted into a
Division only with effect from the beginning of 1998.  At
present its responsibilities  include our Ukrainian joint
venture, Donbas Clays, and our UK-based distribution company,
WBB Interclay Limited.  Most of the output of Donbas Clays is
targeted on the important tile market in Italy, and is sold
there through our wholly-owned agent and distributor, WBB
Italia.

Viewing the investment as a whole, we are pleased with the
developing business from winning and selling Ukrainian clay.
Profits from Donbas Clays have been in line with our
expectations at the start of the joint venture in 1995.
Although most of the clay is still supplied to Italy, our UK
agent and distributor has been successful in developing other
markets and in September commenced operations from a warehouse
in Spain to the important local market.

Year 2000 and the Euro

The Company has set up project groups to assess the Group's
systems capability to accommodate the date transition from 1999
to 2000 as well as to handle the processing of transactions
designated in Euro.  Systems amendments are underway with
completion anticipated well in advance of the new millennium.
Based on our review to date, we do not envisage major cost
directly attributable to either of these issues.

People

We continue our programme of challenging and developing our
managers throughout the Group.  Dr. Mike Woodfine has taken the
leadership of our new Eastern Europe Division, relinquishing
his role as Head of WBB Technology.  Pending a new appointment
to this vacancy, Dr. Graham Lawson is directing the Group's
technical activities which are now carried on in a separate
subsidiary company named WBB Technology.  In line with our
strategic objectives we are strengthening our technology
resources and, as part of that process, secured the services of
Dr. Noel Thomas, a leading clay mineralogist from Leeds
University, who joined the Company in 1997 as Principal
Scientist.

Following the retirement of Mr. Eckart Groll, Mr. Gerhard
Hillebrand has joined us and has succeeded him as Managing
Director of our German Division, the second largest Division
within the WBB Group.  Gerhard Hillebrand has considerable
experience of industrial mineral businesses in Germany and had
previously been responsible for Martin & Pagenstecher
Rohstoffbetriebe GmbH & Co KG, which WBB acquired in 1994 from
the Wulfrather Group.

Our United Clays Division also has a new President through the
internal promotion of Mr. Tom Deems, formerly Senior Vice
President, Operations, in the US.  Tom Deems joined the Group
from Franklin Minerals in 1993 and he, too, has a wealth of
experience in industrial minerals.

During 1997 Mr. Brendan Clifford was confirmed in his
appointment as Managing Director of the Ceramic Body Division.
Each of these new appointees is now a member of the Chief
Executive's Committee, alongside the Group Executive Directors.

Mr. Sav Santoro has moved from Devon Clays to become
responsible for WBB Italia.  The business of WBB Italia has
been expanded since June by taking over the Italian agency
contract for Devon Clays.

At the same time as wishing the incumbents well in their new
roles, we must say farewell to some long-standing members of
the senior management team.  Our former Group Managing
Director, Mr. John Pike, decided to relinquish his executive
responsibilities from the end of January although he remains on
the Board as Deputy Chairman, now in a non-executive capacity.

Mr. Tim Robertson has decided to retire at the end of June in
order to pursue other business interests.  Prior to his two-
year tenure as President of United Clays, he had been Group
Marketing Director for nearly 20 years, based in Devon.

As previously mentioned, Eckart Groll retired after 34 years
from leadership of the German Division.  Mr Groll will assume a
consultancy contract to assist in developing our business in
Eastern Europe later in 1998.

We greatly appreciate the individual and collective
contributions of these senior colleagues, who have each played
major roles in the development of WBB.  We wish them a happy
and successful future.

The Future

The current year has started well.  Notwithstanding the
excellence in product and service that our customers have come
to expect we are not immune to external economic impacts such
as the continuing strength of Sterling and the situation in
Asia. However, through the combined skills of our people and by
regular monitoring of our performance, we expect to contain any
adverse effects to manageable proportions.  Our strategy, which
was first set out in last year's Report, underpins our
approach:  care for customers through a concentration on value,
acquisition of minerals worldwide, technological innovation and
investment in people.  We go forward confidently on that basis.
The new management team has broad experience and will shortly
be fully in place.  The Company is in excellent shape to
continue its successful evolution.

Michael Beckett, Chairman
Graham Lawson, Chief Executive
7th April 1998


WATTS BLAKE BEARNE & Co PLC
Group Trading Results for the twelve months to 31 December 1997



                                       1997        1996        
                                      #'000       #'000
                                 (unaudited)  (audited)
                                                               
Turnover
- by geographical market                                       
United Kingdom                        9,809       9,020    8.8%
Germany                              16,361      19,901  -17.8%
Rest of Europe                       45,950      47,861   -4.0%
North America                        12,755      12,238    4.2%
Rest of World                        13,862      13,911   -0.4%
                                 ----------  ----------
                                     98,737     102,931   -4.1%
                                           
Operating costs                    (85,802)    (90,751)        
                                 ----------  ----------
Operating profit                     12,935      12,180    6.2%
Net interest                        (1,295)     (1,470)        
                                 ----------  ----------
Profit before taxation               11,640      10,710    8.7%
Taxation                            (4,428)     (4,611)        
                                 ----------  ----------
Profit after taxation                 7,212       6,099   18.2%
Minority interests                    (156)           9        
                                 ----------  ----------
Profit for the financial year         7,056       6,108   15.5%
Dividends                           (3,719)     (3,403)    9.3%
                                 ----------  ----------
Retained profit                       3,337       2,705   23.4%
                                 ----------  ----------
                                                               
Earnings per ordinary share           33.5p       29.1p   15.1%

Dividend per ordinary share           17.6p       16.2p    8.6%

WATTS BLAKE BEARNE & Co PLC
Group Cash Flow for the twelve months to 31 December 1997

                                             1997          1996
                                            #'000         #'000
                                      (unaudited)     (audited)
                                                               
Operating profit                           12,935        12,180
Depreciation                                7,453         8,280
Working capital movement                  (1,622)       (1,749)
Other movements                           (2,213)         (417)
                                     ------------  ------------
Net cash from divisional                   16,553        18,294
operations
Interest paid (net)                       (1,310)       (1,470)
Tax paid                                  (4,882)       (4,918)
                                     ------------  ------------
Gross trading cashflow                     10,361        11,906
Capital expenditure (net)                 (9,627)      (11,521)
Dividends paid                            (3,413)       (3,192)
                                     ------------  ------------
                                          (2,679)       (2,807)
Acquisitions and investments                    -       (2,003)
Issue of shares                               286           110
Exchange adjustment                           562         1,843
                                     ------------  ------------
Movement in net borrowings                (1,831)       (2,857)
Opening net borrowings                   (20,556)      (17,699)
                                     ------------  ------------
Closing net borrowings                   (22,387)      (20,556)
                                     ------------  ------------


WATTS BLAKE BEARNE & Co PLC
Balance Sheet as at 31 December 1997

                                             1997          1996
                                            #'000         #'000
                                      (unaudited)     (audited)
                                                               
Fixed assets
Land, minerals & buildings                 62,760        58,631
Plant, equipment and investments           30,188        31,613
                                     ------------  ------------
                                           92,948        90,244
                                     ------------  ------------
Net current assets                                             
Stocks                                      9,504         8,349
Debtors                                    23,404        22,558
Creditors                                (20,051)      (15,964)
                                     ------------  ------------
                                           12,857        14,943
                                                 
Provisions, minorities and non-           (9,048)       (9,254)
equity shares                        ------------  ------------
Net assets                                 96,757        95,933
                                     ------------  ------------
                                                               
Ordinary shareholders' funds               74,370        75,377
Net borrowings                             22,387        20,556
                                     ------------  ------------
                                           96,757        95,933
                                     ------------  ------------


                                                               
Notes on Financial Statements

1.    Turnover and net assets

Turnover represents the invoiced value or goods and services of
the Group, excluding value added taxes and trade discounts, and
is analysed as follows by geographical market and location of
production.  The Net Assets are stated before net borrowings of
#22.387m (1996 #20.556m).

                              Geographical Market
                                        
                                   1997        1996
                                  #'000       #'000
                                       
United Kingdom                    9,809       9,020
Germany                          16,361      19,901
Rest of Europe                   45,950      47,861
North America                    12,755      12,238
North Africa and Middle           5,315       5,905
East
Rest of World                     8,547       8,006
                              ---------  ----------
                                                  -
                                 98,737     102,931
                              ---------  ----------
                                                  -


                             Location of production
                                        
                                   1997        1996
                                  #'000       #'000
                                       
United Kingdom                   45,900      46,092
Germany                          28,806      33,715
Rest of Europe                   10,056       9,663
North America                    12,797      12,521
North Africa and Middle               -           -
East
Rest of World                     1,178         940
                              ---------  ----------
                                 98,737     102,931
                              ---------  ----------


                                   Net assets
                                        
                                   1997        1996
                                  #'000       #'000
                                       
United Kingdom                   41,893      38,390
Germany                          34,646      36,860
Rest of Europe                    5,723       5,357
North America                    13,522      12,603
North Africa and Middle               -           -
East
Rest of World                     1,809       3,150
                              ---------   ---------
                                 97,593      96,360
                              ---------   ---------
                                                               
Notes on Financial Statements
continued

No analysis of profits has been provided as the Directors are
of the opinion that such disclosure would be prejudicial to the
commercial interests of the operating divisions.

Foreign currency exchange rates used in compiling these
financial statements are as follows:

                                    1997              1996
                               Average     Year  Average     Year
                                            end               end
                                                                 
Deutsche Mark                     2.85     2.96     2.38     2.63
US Dollar                         1.64     1.64     1.57     1.69
Portuguese Escudo               288.38   302.64   243.13   264.83
French Franc                      9.58     9.90     8.07     8.90
Dutch Guilder                     3.21     3.34     2.66     2.96
Italian Lire                  2,805.06 2,908.47 2,422.23 2,592.64
Ukrainian Hryvna                  2.96     3.12     2.85     2.99
Singapore Dollar                  2.45     2.78     2.22     2.37
Hong Kong Dollar                 12.69    12.72    12.17    13.09
Indonesian Rupiah             4,816.18 7,708.79 3,666.12 3,996.03
Thai Baht                        52.71    78.99    39.93    43.36




2.    Statement of Total Recognised Gains and Losses
          for the year ended 31st December 1997


                                                  1997     1996
                                                 #'000    #'000
                                                      
Profit for the financial year                    7,056    6,108
Currency translation differences on foreign                    
currency net investments                       (4,375)  (6.098)
                                               -------  -------
Total recognised gains and losses relating to    2,681       10
the year                                       -------  -------



Notes on Financial Statements
continued


3.    Reconciliation of Movements in Shareholders' Funds

                                                  1997     1996
                                                 #'000    #'000
                                                               
Profit for the financial year                    7.056    6,108
Dividends                                      (3,719)  (3,403)
                                               -------  -------
                                                 -----    -----
                                                 3,337    2,705
Other recognised gains and losses              (4,375)  (6,098)
Issue of shares                                    286      110
Goodwill written off to reserves                 (255)    (749)
                                               -------  -------
Net decrease in shareholders' funds            (1,007)  (4,032)
Shareholders' funds at 1st January              75,523   79,555
                                               -------  -------
Shareholders' funds at 31st December            74,516   75,523
                                               -------  -------
Attributable to                                                
Equity shareholders                             74,370   75,377
Non-equity shareholders:                                       
Preference shares:                                 146      146
                                               -------  -------
                                                74,516   75,523
                                               -------  -------

4.    Earnings per share

The earnings per ordinary share have been calculated on Group
profit (after tax, minority interests, and preference
dividends) of #7.050 m (1996: #6.102 m) and on a weighted
average of issued ordinary shares of 21,024,024
(1996:20,945,342).  The fully diluted earnings per share are
not materially different from those shown.


END



FR ANARKWVKSRUR