REG - Forterra plc - Full Year Results
12/03/2025 07:00
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RNS Number : 2763A Forterra plc 12 March 2025
12 March 2025
Strong cash generation; improved performance in H2
Adjusted(1) Statutory
2024 2023 Change 2024 2023 Change
£m £m (%) £m £m (%)
Revenue 344.3 346.4 (0.6) % 344.3 346.4 (0.6) %
EBITDA(2) 52.0 58.1 (10.5) % 54.7 44.1 24.0 %
EBITDA(2) margin 15.1% 16.8% (170) bps 15.9% 12.7% 320 bps
Operating profit (EBIT) 31.2 38.1 (18.1) % 33.9 24.1 40.7 %
Profit before tax 22.1 31.1 (28.9) % 24.8 17.1 45.0 %
Earnings per share (pence) 7.6 11.4 (33.3) % 8.3 6.2 33.9 %
Operating cash flow 60.1 (5.3) n/a 51.8 (11.2) n/a
Net debt before leases (84.9) (93.2) (8.9) %
Total dividend (pence) 3.0 4.4 (31.8) %
(1)Adjusted results for the Group have been presented before exceptional and
adjusting items (2024: income of £2.7m, 2023: expense of £14.0m) relative to
statutory profit as explained in Alternative Performance Measures within note
14. Presenting these measures allows a consistent comparison with prior
periods.
(2)EBITDA, adjusted EBITDA and net debt before leases are APMs, as explained
in note 14. They are presented above under the statutory heading, being
calculated with reference to statutory results without adjustment.
RESULTS HIGHLIGHTS
• Revenue flat year-on-year, with a double digit increase in H2 24
relative to both the prior year and H1 24
• 2024 UK brick industry despatches up 2% compared with 2023, with
Q4 despatches c.20% ahead of the corresponding period; total UK brick
consumption remains c.30% behind 2022 levels
• Pricing discipline maintained with selling prices remaining
relatively stable across our product range
• Adjusted EBITDA of £52.0m, slightly ahead of our revised
expectations of around £50m
• Strong improvement in cash generation with adjusted operation cash
flow of £60.1m
• Good ongoing strategic progress at Desford, Wilnecote and
Accrington with our solar farm also commencing generation in the year
• Net debt before leases of £84.9m, equating to leverage of c.1.9
times on a banking covenant basis; further debt reduction expected in 2025
• Recommended final dividend of 2.0p per share (2023: 2.0p) in line
with our temporary policy of distributing 40% of earnings
Neil Ash, Chief Executive Officer, commented:
"2024 saw the continuation of the challenging market conditions we have
witnessed over the last two years, though the second half saw an improving
position. Our focus has been on the areas we can control and delivered a
resilient performance by successfully aligning our production to demand and
returning the Group to a position of strong cash generation. We also continued
to make good progress with our £140m strategic capital investment programme
at Desford, Wilnecote and Accrington, which is now nearing completion.
"Trading in the first two months of 2025 has continued the positive trends
seen in the final quarter of 2024, with our brick despatches 17% ahead of the
prior year. We are currently concluding our customer pricing discussions and
expect to deliver necessary price increases to offset cost inflation. We
continue to take encouragement from the Government's ambition to materially
increase housebuilding but remain wary of the challenges in delivering this.
During 2025, we anticipate some recovery in our markets, whilst remaining
mindful of the wider macroeconomic conditions. Following our significant
strategic investment in increased manufacturing capacity, the Group remains
well placed as its key markets recover."
ENQUIRIES
Forterra plc +44 1604 707 600
Neil Ash, Chief Executive Officer
Ben Guyatt, Chief Financial Officer
FTI Consulting +44 203 727 1340
Richard Mountain / Nick Hasell
A presentation for analysts will be held today, 12 March 2025, at 09.00am. A
video webcast of the presentation will be available on the Investors section
of our website (http://forterraplc.co.uk/).
ABOUT FORTERRA PLC
Forterra is a leading UK manufacturer of essential clay and concrete building
products, with a unique combination of strong market positions in clay bricks,
concrete blocks and precast concrete flooring. Our heritage dates back many
decades and the durability, longevity and inherent sustainability of our
products is evident in the construction of buildings that last for
generations; wherever you are in Britain, you won't be far from a building
with a Forterra product within its fabric.
Our clay brick business combines our extensive secure mineral reserves with
modern and efficient high-volume manufacturing processes to produce large
quantities of extruded and soft mud bricks, primarily for the new build
housing market. We are also the sole manufacturer of the iconic Fletton brick,
sold under the London Brick brand, used in the original construction of nearly
a quarter of England's housing stock and today used extensively by homeowners
carrying out extension or improvement work. Within our concrete blocks
business, we are one of the leading producers of aircrete and aggregate
blocks, the former being sold under one of the sector's principal brands of
Thermalite. Our precast concrete products are sold under the established Bison
Precast brand, and are utilised in a wide spectrum of applications, from new
build housing to commercial and infrastructure.
INTRODUCTION
2024 was another challenging year for our industry. Whilst we saw a
continuation of the depressed trading conditions we first experienced in 2023
with subdued demand across our product range, we did see some modest
improvement through the second half. Our brick production output was below 60%
of installed capacity which has clearly led to significant operating
inefficiency with brick factories in particular having a high percentage of
fixed costs. Against this, we delivered a resilient response, successfully
aligning our production to demand and returning the Group to a position of
strong cash generation.
Notwithstanding the market driven headwinds and uncertainty that we faced, we
made continued progress on our strategy with our £140m programme of capital
investment in our three projects at Desford, Wilnecote and Accrington nearing
completion. We made excellent progress with the commissioning of our new
£12m brick slip production facility at Accrington, which will be delivered
both on time and on budget. This investment sits at the heart of the 'beyond
the core' arm of our strategy which will capitalise on the growth
opportunities afforded by modern methods of construction.
Under the 'strengthening the core' arm of our strategy, we continue to make
progress on ramping up production and increasing efficiency at our Desford
brick factory, where we successfully addressed a number of snagging and
efficiency issues during an extended shutdown in the summer of 2024. We are
also making progress on the reinstatement of our Wilnecote factory despite
setbacks with our supply chain. This will offer us greater diversification
through strengthening our offering to the attractive commercial and
specification market. The £30m redevelopment is on course for completion in
Q2 2025 with the kiln expected to be lit in the near future.
OUR MARKETS
2024 industry brick despatches increased by 2% relative to the low point of
2023. Whilst demand remained depressed throughout the year, 2024 did see a
more stable pattern whilst 2023 was subject to significant monthly
fluctuation. At the half year, UK brick industry despatches were 9% behind the
prior year, offset by the second half being 15% ahead, bringing the full year
variance to a 2% increase.
The Construction Products Association estimates that in 2024 new housing
completions fell by 21% relative to 2023. Housing starts are also estimated to
have fallen by 10%. In 2023 demand for bricks fell more markedly than the
headline housing starts and completion figures, this being a function of
housebuilder order books, work in progress and the inventories of construction
materials they held. 2024 showed slight improvement in brick demand, whilst
housing starts and completions statistics showed further reductions.
With imports of bricks to the UK falling by 4% in the year to 316 million
bricks, total UK brick consumption remained at approximately 1.7 billion
bricks (2023: 1.7 billion), which is still around 30% below 2022 consumption
of 2.5 billion bricks. At the same time housing starts and completions were
35% and 19% below 2022 levels respectively. With brick consumption falling
further from 2022 levels relative to completions, this supports the view that
brick consumption has the potential to grow at a faster rate than housing
completions in the short-term.
CURRENT TRADING AND OUTLOOK
Trading in the first two months of 2025 continued the positive trends seen in
the final quarter of 2024, with our brick despatches around 17% ahead of the
prior year, although the comparative was impacted by adverse weather
conditions. This is supported by DBT statistics showing that industry brick
despatches in January were 11% ahead of the prior year. Entering 2025, we are
facing more normal levels of cost inflation, but with the added challenge of
increasing Employers' National Insurance contributions from April 2025 as
outlined in the Autumn Budget. We are currently concluding our customer
pricing discussions and expect to deliver necessary price increases to offset
cost inflation.
We continue to take encouragement from the Government's ambition to materially
increase housebuilding, but remain wary of the challenges in delivering this.
We look forward to the Government considering wider levers to stimulate both
supply and demand for new housing. During 2025, we anticipate a steady but
modest recovery in our markets, whilst remaining mindful of wider
macroeconomic conditions. We believe the Group remains well placed to
capitalise as its key markets recover and retain our view that based on 2022
performance coupled with benefits of our strategic investments, notably
Desford, the Group is capable of delivering an annual EBITDA of c.120m in the
medium-term.
RESULTS FOR THE YEAR
REVENUE
Total revenue of £344.3m is in line with the prior year (2023: £346.4m)
although sales volumes to some extent varied by product. Our brick despatches
were closely aligned to the wider market, being flat year-on-year, although
with an improving trend through 2024. Despatches in the second half
demonstrated a double digit increase relative to the first half. Demand for
our concrete products did improve, particularly in the second half, with
Aircrete showing the strongest increase, driven by both changes in Building
Regulations as well as production challenges faced by our competitors. Pricing
remained broadly stable across our product range.
ADJUSTED EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (EBITDA)
Adjusted EBITDA was £52.0m (2023: £58.1m) with profitability impacted not
only by depressed demand, but also by the significant operating inefficiencies
that we are forced to carry until demand recovers to normalised levels. As a
reminder, our 2023 result benefited from the absorption of fixed costs as we
increased our inventory levels, something we didn't do in 2024.
Our business is managed as two segments and we allocate our central overheads
to each segment based on a historic revenue-driven allocation mechanism, with
central overheads allocated to Bricks and Blocks and Bespoke Products in the
ratio 80%:20% respectively. In practice, the allocation of overheads to
Bespoke Products exceeds the level of overheads that are directly applicable
to this segment, such that if this segment was to be discontinued or divested
then the saving of overheads, would in reality, be modest. Accordingly, we
also disclose the allocation of central overheads to give greater visibility
of the underlying profitability of our segments, in particular Bespoke
Products. Bricks and Blocks segmental adjusted EBITDA was £49.0m (2023:
£52.1m) and Bespoke Products contributed an adjusted EBITDA of £3.0m (2023:
£6.0m).
ADJUSTED PROFIT BEFORE TAX
Adjusted profit before tax was £22.1m (2023: £31.1m) with the reduction
driven primarily by the fall in EBITDA as highlighted above, along with an
increase in both the level and cost of borrowing.
STATUTORY PROFIT BEFORE TAX
On a statutory basis, profit before tax (PBT) was £24.8m (2023: £17.1m).
This is stated after charging adjusting and exceptional items as set out under
the sections for exceptional and adjusting items.
OPERATING INEFFICIENCIES
Following the sharp fall in demand for our products in 2023, we successfully
aligned our production with prevailing market demand. These actions
were substantially completed in 2023 and in 2024 our brick production aligned
to demand, albeit with a resultant but unavoidable operating inefficiency
within our factory network.
Overall, in 2024 our brick production output was below 60% of our installed
capacity (excluding Howley Park, which we have now closed permanently) leading
to significant operating inefficiencies, with brick factories having a high
percentage of fixed costs within their cost base.
We mothballed our brick factories at Howley Park and Claughton in 2023 and we
have since determined that our Howley Park factory will not reopen as it was
approaching the end of its useful life when it was mothballed and would not be
cost effective to reinstate, especially with the optionality of future
development at our Swillington site only a short distance away.
Whereas in some cases mothballing is the most cost-efficient option to reduce
output, this is not always possible. At other factories we have reduced output
by reducing the number of shifts that we operate, most commonly in our
concrete products factories where variable input costs are the largest
component of our production costs. In other cases, it is more efficient to run
factories at full output but for only part of the year.
At Desford we undertook an extended shutdown in the summer to address a number
of snagging issues and have made good progress since then. Whilst the factory
is not yet able to achieve its designed level of efficiency, mainly because
market conditions only allow us to run one of the twin kilns at any one time,
we have recently conducted a detailed review into factory performance and
remain confident in its ability to achieve its target of £25m annual EBITDA,
assuming a return to 2022 market conditions.
OPERATING COSTS
Our cost base was broadly stable throughout the year although we did see a
degree of labour cost inflation along with a substantial increase in business
rates. Our energy costs have stabilised as expected, but remain significantly
above pre-pandemic levels, with the cost of our inputs, particularly those
with a high energy component, such as cement, not reducing.
We take a risk-based approach to energy procurement, layering forward
purchase positions where we see future value, to provide cost certainty. The
Group generally purchases up to 80% of expected energy usage in this manner.
Under normal circumstances the Group takes delivery of, and consumes all the
gas and electricity purchased under each forward contract, and in doing so
the costs associated with the purchase of gas and electricity are accounted
for in the income statement at the point of consumption. However, following
substantial reductions in output, based on our revised expectations of
production, we over-purchased energy and sold any surplus back to the market,
crystallising a gain or loss. Forward contracts open at the balance sheet
date, where a sell-back is expected to occur, are accounted for as derivative
assets or liabilities with any associated fair value movements recognised in
the income statement and presented as adjusting items.
Looking ahead, we have forward purchased around 85% of our energy requirement
for 2025, providing a high degree of price certainty. From April 2025 we will
gain the full financial benefit of the Forterra Solar Farm, having originally
signed the 15-year Power Purchase Agreement (PPA) in 2022. Whilst we have been
receiving power since May 2024, the first 11 months are chargeable at a higher
prevailing market rate ahead of the formal commencement of the PPA providing
price certainty over a 15-year period.
BRICKS AND BLOCKS
We possess a unique combination of strong market positions in both clay brick
and concrete blocks.
We are the only manufacturer of the iconic and original Fletton brick sold
under the London Brick brand. Fletton bricks were used in the original
construction of nearly a quarter of England's existing housing stock and are
today used to match existing brickwork by homeowners carrying out extension or
improvement work. We operate eight brick factories in seven locations across
the country with a total installed production capacity of approximately 600
million bricks per annum.
We are also a leader nationally in the aircrete block market, operating two
Thermalite block facilities in the Midlands and South of England. In addition,
our aggregate block business has a leading position in the important
Southeast and East of England markets where it has two well-located
manufacturing facilities. This segment also includes Formpave, the Group's
concrete block paving business.
Our clay reserves are the foundation that our brick business is built upon
and are the primary raw material used in manufacturing our bricks. Each of our
brick factories is located adjacent to a quarry supplying locally sourced clay
directly into the manufacturing process. Sourcing material locally is
sustainable and therefore preferable wherever possible as it avoids the costs
and carbon emissions associated with transportation. Our mineral reserves also
provide a natural barrier, reducing the threat of new entrants entering the
market as the planning process to secure consent for a 'green-field' quarry
and associated brick factory can take as long as 10 years. Each of the new
brick factories built in the UK over the last two decades have been
redevelopments of existing facilities utilising established quarries. We have
access to over 90 million tonnes of minerals, and on average these reserves
are sufficient to sustain manufacturing operations for 50 years. The majority
of our minerals are owned, although a small amount are secured by way of lease
with a royalty payable at the point of extraction.
TRADING AND RESULTS
The performance of the Bricks and Blocks segment was principally driven by the
demand dynamics outlined above. Bricks and Blocks sales revenues were
£276.7m, in line with the prior year (2023: £277.4m). Segmental adjusted
EBITDA totalled £49.0m (2023: £52.1m), a decrease of 6.0%. Adjusted EBITDA
margin was 17.7% (2023: 18.8%). We were pleased to deliver an EBITDA margin of
almost 18% whilst running our network of factories at around 60% of capacity.
2024 2023
£m £m
Adjusted Statutory Adjusted Statutory
Revenue(1) 276.7 276.7 277.4 277.4
EBITDA(2) before overhead allocations 66.2 71.7 70.0 56.3
Overhead allocations(3) (17.2) (17.2) (17.9) (17.9)
EBITDA(2) after overhead allocations 49.0 54.5 52.1 38.4
EBITDA(2) margin before overhead allocations 23.9% 25.9% 25.2% 20.3%
EBITDA(2) margin after overhead allocations 17.7% 19.7% 18.8% 13.8%
(1)Revenue is stated before inter-segment eliminations.
(2)Both EBITDA and adjusted EBITDA are APMs, as explained within note 14.
EBITDA is presented above under the statutory heading, being calculated with
reference to statutory results without adjustment.
(3)Overhead allocations are costs centrally incurred by the Group, including
general administrative expenses.
SALES VOLUMES
Our own brick despatches remained closely correlated with wider market trends.
Our aggregate block business also reported year-on-year growth in despatches
aligned to the wider brick market. Our aircrete block business demonstrated
the strongest volume performance with volumes increasing by more than 20%,
allowing us to reduce the significant inventory we had accumulated in 2023. We
believe this increase in demand was attributable in part to changes in the
Building Regulations, increasing usage of thermally efficient aircrete,
although we also likely benefited from our competitors experiencing supply
constraints.
PRICING AND COSTS
We saw a continued stabilisation of our cost base in 2024 following the
significant cost inflation seen in recent years. As expected, our energy costs
peaked in 2023 and although we have seen some stabilisation in 2024, these
remained significantly ahead of longer-term norms. We did however experience
continued cost inflation in other categories, namely staff costs and in
particular business rates.
Armed with forward visibility of these increases in our cost base, in late
2023 we announced modest price increases aimed at recovering this cost
inflation to apply from early 2024. Unfortunately, challenging market
conditions and competitor behaviours determined that these price increases did
not hold in the market, as we needed to ensure our pricing remained
competitive. Despite this, brick pricing remained broadly stable throughout
the year and at the end of 2024 our brick prices remain only mid-high single
digits below the levels achieved at the end of 2022. Pricing of our aggregate
and aircrete block products followed a similar pattern to bricks, remaining
broadly stable in the year.
OPERATIONS
This year brought a degree of stability to our manufacturing operations. With
the management actions necessary to align our production with customer demand
announced and committed towards the end of 2023, 2024 saw the completion of
these measures with a number of colleagues regrettably leaving the business in
the first quarter.
Thereafter, our manufacturing operations ran consistently at a reduced level
of output. Aside from some continuing commissioning challenges at Desford,
which we substantially addressed through an extended two-month summer shut
down, our factories ran well and we made good progress on our renewed focus on
manufacturing excellence, delivering a number of savings in the year and
contributing to our successful cash management.
As the end of the year approached we took the first steps in what we refer to
as 'Project Rebound', our roadmap to increasing the Group's output back to
2022 levels and beyond. The first step was to increase production of our
aircrete blocks after a strong 2024 performance which saw a significant
reduction in our inventories of this product. We have created 40 new roles
within the business with production increasing from January 2025.
Each of our previous rationalisation actions were taken with a view to
reducing output in the short-term without diminishing the long-term productive
capacity of the business. However during 2024 we considered the position of
our Howley Park brick factory, taking the decision that the mothballing of
this plant would in fact become a permanent closure. Howley Park was the
oldest and least efficient brick factory in our network, originally opening in
the 1970s. The plant was already approaching the end of its useful life when
it was mothballed, with the Group having optionality to develop a replacement
factory at nearby Swillington.
With the opening of our new factory at Desford giving us an effective 22%
increase in our brick production capacity, our market projections did not
envisage requiring Howley Park until 2029 or beyond, by which time it would
have been mothballed for around six years and the costs of recommissioning the
factory would not have made financial sense given the plant's relatively short
remaining life and high cost of production. The Group currently retains the
factory site and is considering its future use. Inclusive of the closure of
Howley Park, our investments at Desford and Wilnecote will leave us with a net
15% increase in brick production capacity relative to the last turn of the
cycle, supplemented by our new market-leading brick slip manufacturing
facility at Accrington.
BESPOKE PRODUCTS
Precast concrete products are designed, manufactured and shipped nationwide
under the Bison Precast brand from two facilities situated in the Midlands.
Our products comprise beam and block flooring, including Jetfloor, which was
the UK's first suspended ground floor system to use expanded polystyrene
blocks combined with a structural concrete topping to provide high levels of
thermal insulation; hollowcore floors alongside accompanying staircases and
landings are used for upper floors of multi-family and commercial
developments, structural precast components including precast concrete walls
used in applications such as hotels and prisons, and concrete beams used in
the construction of building frames as well as stadia components;
architectural precast concrete façades, in a variety of finishes including
brick facings.
TRADING AND RESULTS
Precast concrete flooring solutions represent by far the largest component of
this segment by revenue and profitability. The performance of this segment was
correlated to that of bricks and blocks. Segmental turnover in the year was
broadly flat at £71.5m (2023: £72.7m).
Segmental adjusted EBITDA stated before allocation of Group overheads was
£7.3m (2023: £10.5m). It is worth highlighting that in contrast to Bricks
and Blocks, this segment had a particularly strong 2023 with performance ahead
of 2022. After an allocation of Group overheads totalling £4.3m (2023:
£4.5m), the segment's adjusted EBITDA was £3.0m (2023: £6.0m).
2024 2023
£m £m
Adjusted Statutory Adjusted Statutory
Revenue(1) 71.5 71.5 72.7 72.7
EBITDA(2) before overhead allocations 7.3 7.2 10.5 10.2
Overhead allocations(3) (4.3) (4.3) (4.5) (4.5)
EBITDA(2) after overhead allocations 3.0 2.9 6.0 5.7
EBITDA(2) margin before overhead allocations 10.2% 10.1% 14.4% 14.0%
EBITDA(2) margin after overhead allocations 4.2% 4.1% 8.3% 7.8%
(1)Revenue is stated before inter-segment eliminations.
(2)Both EBITDA and adjusted EBITDA are APMs, as explained within note 14.
EBITDA is presented above under the statutory heading, being calculated with
reference to statutory results without adjustment.
(3)Overhead allocations are costs centrally incurred by the Group, including
general administrative expenses.
SALES VOLUMES
Overall, floor beam despatches increased by around 10% relative to the prior
year with a significant improvement seen in the second half of the year, with
despatches approximately 20% ahead of the first half. Hollowcore was more
challenging as despite a strong order book, we suffered from slippage and
delay of customer projects which meant we manufactured and despatched less
product than the previous year.
PRICING AND COSTS
In common with Bricks and Blocks, this segment experienced a modest level of
underlying cost inflation although there was some additional volatility in the
cost of insulation, its largest single input cost. Challenging market
conditions resulted in some small reductions in selling prices which meant we
were unable to offset the volatility in insulation costs, impacting margins
accordingly.
ALTERNATIVE PERFORMANCE MEASURES
In order to provide the most transparent understanding of the Group's
performance, we use alternative performance measures (APMs) which are not
defined or specified under IFRS. The Group believes that these APMs provide
additional helpful information on how the trading performance of the Group is
reported and reviewed internally by management and the Board, allowing
non-trading items which are less likely to recur to be assessed separately.
Management and the Board use several profit related APMs in assessing Group
performance and profitability. These are considered before the impact of
exceptional and adjusting items. Exceptional and adjusting items are detailed
below and a full reconciliation between adjusted and statutory results is
presented within note 14 to the consolidated financial information.
EXCEPTIONAL ITEMS
Exceptional items include redundancy and termination costs associated with the
restructuring of our operations in response to the market downturn. Whilst the
bulk of these actions were announced in 2023, modest further restructuring
measures took place during 2024. In addition, the Group incurred exceptional
costs of £2.7m in respect of an aborted corporate transaction as announced at
the time of the interim results. The Board actively considers opportunities
for inorganic growth through acquisition, however will only proceed should
opportunities not only meet our strategic objectives but also provide
demonstrable value for our shareholders.
ADJUSTING ITEMS
In addition to exceptional items, we have also identified further adjusting
items, the separate disclosure of which allows us to present our results in a
manner that will allow users of our financial statements to understand the
underlying trading performance of the business applying consistent treatments
as used by management to monitor the performance of the Group.
Adjusting items in the current and previous year relate to both realised and
open energy positions where committed energy purchased by the Group has or is
expected to exceed consumption. Where forward energy contracts are expected to
be utilised in full, we apply the own use exception within IFRS 9 Financial
Instruments and these are not marked to market. Where we have energy in excess
of our anticipated needs secured under forward contracts, these contracts do
not meet the own use exemption and as such are treated as derivatives and
marked to market, resulting in gains and losses as market prices fluctuate.
Any impact on the profit and loss as a result of this marked to market
treatment, along with profits and losses on the sale of surplus energy, are
shown as adjusting items.
2024 2023
£m £m
Adjusted EBITDA(1) 52.0 58.1
Exceptional costs:
Restructuring costs (0.2) (9.0)
Aborted corporate transaction (2.7) -
Impairment of plant and equipment - (5.0)
Adjusting items:
Realised loss on the sale of surplus energy (1.5) (0.8)
Derivative gain on future energy contracts 7.1 0.8
EBITDA(1) 54.7 44.1
(1)Both EBITDA and adjusted EBITDA are APMs, as explained within note 14.
EBITDA is presented above under the statutory heading, being calculated with
reference to statutory results without adjustment.
FINANCE COSTS
Finance costs totalled £9.1m (2023: £7.0m). The increase in our finance
costs relative to the prior year was primarily a function of increasing levels
of borrowing through 2023 along with increasing interest rates through 2023,
with these only falling slightly towards the end of 2024. In addition, an
increased margin became payable as leverage increased. Finance costs are
stated net of capitalised interest of £2.1m (2023: £nil) in respect of the
capital investment projects at Wilnecote and Accrington.
Under the terms of the credit agreement, interest is payable according to a
margin grid dependent on leverage starting with a margin of SONIA plus 1.65%
applicable whilst leverage (net debt/adjusted EBITDA, as measured before the
impact of IFRS 16) is less than 0.5 times, rising to a margin of 3.5% if
leverage is greater than 3.5 times. A commitment fee of 35% of the margin was
payable on the undrawn credit facility.
TAXATION
The adjusted effective tax rate (ETR) excluding the impacts of exceptional and
adjusted items was 27.1% (2023: 24.5%). The increase in the ETR is partly
driven by the full year effect of the increase in the UK statutory rate of
corporation tax to 25.0% (2023: 23.5%). The ETR is higher than the UK main
rate of corporation tax due to the permanent impact of non-deductible items
such as depreciation on non-qualifying assets. With adjusted profits in 2024
being lower than 2023, the impact of permanent non-deducible items as a
percentage of profit is higher and has increased the adjusted ETR. The
statutory ETR was 29.5% (2023: 25.0%) with the increase attributable to the
reasons laid out above, along with the impact of non-deductible professional
fees incurred on an aborted corporate transaction.
EARNINGS PER SHARE (EPS)
Adjusted basic EPS was 7.6p (2023: 11.4p). Statutory basic EPS was 8.3p (2023:
6.2p). EPS is calculated as the weighted average number of shares in issue
during the year (excluding those held by the Employee Benefit Trust (EBT))
which in 2024 was 210.6 million shares (2023: 206.6 million).
CASH FLOW
It is within our cash flow statement that our improved year-on-year
performance is most visible. 2023 was characterised by a large increase in
borrowings as inventories increased markedly as it took time to right-size our
business in response to the sudden reduction in market demand. Cash and
balance sheet management have been key focus areas and in 2024 we are
reporting a return to a strong adjusted operating cash flow, demonstrating the
success of our management actions in placing the Group on a firm financial
footing.
Adjusted operating cash flow recovered to £60.1m (2023: adjusted operating
cash outflow of £5.3m), a year-on-year improvement of £65.4m. This helped
drive a £8.3m reduction in net debt before leases to £84.9m (2023: £93.2m)
despite a total capital expenditure of £25.6m including £21.6m on our three
strategic projects at Desford, Wilnecote and Accrington. This improved
performance is primarily a result of our ability to align production to
demand, with inventories, particularly of our concrete products, reducing in
the year, demonstrating that despite a continuation of challenging market
conditions, we have successfully adapted our operations to current demand.
Inventories decreased by a total of £13.8m with brick inventories remaining
broadly stable.
The cash flows driven by movements in receivables and payables are primarily a
function of increasing sales activity, particularly in the final part of the
year where the prior year comparatives were particularly weak.
Cash outflows in respect of adjusting items comprise restructuring costs of
£3.8m, the majority of which were committed in the prior year, fees in
respect of the aborted corporate transaction of £2.7m and payments to settle
surplus gas contracts of £1.8m.
The Group received a net tax refund of £0.4m, driven by a refund of £2.2m
received in respect of 2023. The Corporation tax charge in respect of 2024 is
£3.2m, this liability was satisfied by payments to HMRC of £1.8m and an
estimated R&D tax credit claim for 2024 of £1.4m.
The new lease liabilities entered into in the year primarily relate to plant
and equipment and vehicles with these assets renewed on a regular basis in the
ordinary course of business.
Net receipts from the EBT in the year totalled £5.1m (2023: payment of
£1.0m). With challenging trading conditions determining that Performance
Share Plan (PSP) awards due to vest in 2024 will not do so, the EBT's current
requirement for shares to satisfy awards is diminished, hence no contributions
are being made to the EBT at present. During the year the Company received
proceeds of £3.5m from the EBT in respect of the 2023 SAYE scheme that vested
in late 2023. As at the year end, the EBT held 1.9 million shares (2023: 5.5
million shares) with a market value of £3.1m (2023: £9.7m) with the decrease
primarily attributable to the 2.3 million shares used to satisfy exercised
sharesave awards. It remains our policy to provide shares for settlement of
our share-based employee reward schemes through open market purchases as
opposed to the issue of new share capital.
2024 2023
£m £m
Adjusted EBITDA 52.0 58.1
Purchase and settlement of carbon credits 6.0 3.1
Other cash flow items (6.5) (4.1)
Changes in working capital
- Inventories 13.8 (52.8)
- Trade and other receivables (8.0) 13.3
- Trade and other payables 2.8 (22.9)
Adjusted operating cash flow 60.1 (5.3)
Payments made in respect of adjusted items (8.3) (5.9)
Operating cash flow after adjusted items 51.8 (11.2)
Interest paid (10.0) (6.1)
Tax credit/(paid) 0.4 (2.7)
Capital expenditure
- Maintenance (4.0) (14.8)
- Strategic (21.6) (19.3)
Dividends paid (6.3) (25.7)
Net cash flow from sale and purchase of shares by Employee Benefit Trust 5.1 (1.0)
Repayment of lease liabilities (5.9) (5.9)
Other movements (1.2) (0.6)
Decrease/(increase) in net debt before leases 8.3 (87.3)
Debtor days 41 33
CAPITAL EXPENDITURE
The cash outflow in relation to capital expenditure excluding capitalised
borrowing costs totalled £25.6m (2023: £34.1m) with strategic capital
expenditure totalling £21.6m (2023: £19.3m) and maintenance capital
expenditure totalling £4.0m (2023: £14.8m).
Strategic capital expenditure has been focused upon the projects at Wilnecote
and Accrington. The Accrington project is nearing completion, and is expected
to be delivered in line with both timetable and budget, with commissioning
underway ahead of the year end. Cash spend was £8.0m (2023: £3.2m) in the
year excluding capitalised borrowing costs of £0.5m (2023: £nil).
Each of our three strategic capital investment projects have been executed
under fixed price contracts which have provided us with price certainty at a
time of significant cost inflation. Were the Desford project to commence
today, management estimate the cost would rise to approximately £120m
compared to the budget of £95m which we set in 2019 and still expect to
meet.
The Wilnecote project continues to progress although it has been subject to a
number of supplier-driven delays. Whilst we have benefited significantly from
a fixed price contract, this has placed significant pressure on our suppliers
and has contributed to delays. Cash spend on Wilnecote in the year totalled
£10.7m (2023: £10.9m) bringing total spend on the project to £28.6m,
excluding capitalised interest. We still expect to deliver the factory broadly
within its original £30m budget.
The reduction in maintenance capital spend reflects our balance sheet
management and also the temporary reduction in our output. The prior year
comparative also included around £6.0m of one-off items including solar
panels at our Desford facility. Our capex spend in 2025 is expected to reduce
to around £15m, with approximately £8m of this related to the completion of
the strategic projects.
BORROWINGS AND FACILITIES
At 31 December 2024 net debt before leases was £84.9m equating to leverage of
c.1.9 times on a banking covenant basis and an £8.3m reduction on 2023
(£93.2m) notwithstanding capital spend of over £20m on our strategic
projects during the year. Net debt after adding lease liabilities of £20.9m
(2023: £24.2m) was £105.8m (2023: £117.4m). These leases primarily relate
to plant and equipment, in particular the fleet of heavy goods vehicles used
to deliver our products to our customers.
The Group's credit facility comprises a committed revolving credit facility
(RCF) of £170m extending to January 2027 with an option for an extension to
June 2028 subject to lender consent. At the year-end a total of £100.0m was
drawn on the facility, leaving headroom of £70.0m.
The facility is normally subject to covenant restrictions of net debt/EBITDA
(as measured before the impact of IFRS 16) of less than three times and
interest cover of greater than four times. The Group also benefits from an
uncommitted overdraft facility of £10.0m. The Group has traded comfortably
within these covenants throughout 2024 although in order to ensure a
sufficient degree of headroom, amended covenants were agreed with the Group's
lenders. Accordingly, the Group's leverage covenant was increased to 3.75
times in December 2024 with interest cover decreasing to 3 times.
In addition, quarterly covenant testing has been introduced for the period of
the covenant relaxation. As such, in March 2025 leverage is set at 3.75 times
and interest cover at 3 times. The covenants return to normal levels from June
2025 with testing reverting to half yearly. The existing restriction
prohibiting the declaration or payment of dividends should leverage exceed 3
times EBITDA was amended to 4 times EBITDA in 2024 before returning to 3 times
in 2025.
The facility is linked to our sustainability targets with the opportunity to
adjust the margin by 5 bps subject to achieving annual sustainability targets
covering decarbonisation, plastic reduction and increasing the number of
employees in earn and learn positions. Unfortunately, primarily as a
consequence of our response to market conditions and the subsequent loss in
operating efficiency, these targets were not achieved in 2024. Further
information is included in our Sustainability Report.
We expect a further acceleration in debt reduction in 2025 with improving
markets and strategic capex spend expected to total £8.0m (2024: £21.6m) as
we complete the three projects at Desford, Wilnecote and Accrington.
In line with previous seasonal trends, this debt reduction is likely in H2
2025 with a modest increase in net debt likely at HY 2025. The Board
reiterates its long-term leverage target of 1.5 times or below, and presently
expects this to be achieved at the end of 2025.
STRATEGY
Our strategy for growth together with clear capital allocation priorities
positions the Group to deliver long-term shareholder value. Our strategy is to
capitalise on the UK's long-term shortage of housing supply, along with
a structural shortfall in the supply of the domestically manufactured
building products necessary to address this housing shortage, leveraging our
extensive mineral reserves and strong market positions.
This strategy encapsulates the following strategic imperatives, the
achievement of which will deliver sustained shareholder value:
• Strengthen the core: Investing in new capacity to deliver growth
in sales volumes along with enhanced efficiency;
• Beyond the core: Expanding our product range beyond our
traditional focus of mainstream residential construction focusing on new and
evolving solutions such as brick slips;
• Sustainability: Making our business more sustainable in everything
we do; and
• Safety and engagement: Safety remains our number one priority and
through prioritising employee engagement we will maximise the potential of our
workforce.
During 2024 we made demonstrable progress toward our strategic objectives,
particularly with progress on our strategic capital investment programme with
commissioning of our new brick slip manufacturing facility commencing ahead of
the year end, and with the Wilnecote brick factory redevelopment nearing
completion with commissioning commencing in the first half of 2025.
CAPITAL ALLOCATION
Our capital allocation policies are clearly outlined and designed
to maximise shareholder value:
• Strategic organic capital investment to deliver attractive
returns;
• Attractive ordinary dividend with a mid-term pay-out ratio of 55%
of earnings, temporarily reduced to 40% until leverage has reduced to a more
sustainable level;
• Bolt-on acquisitions as suitable opportunities arise in adjacent
or complementary markets; and
• Supplementary shareholder returns as appropriate.
We are coming to the end of our £140m investment in our three exciting
expansion projects at Desford, Wilnecote and Accrington. The challenging
market conditions we have faced during this period of investment did initially
place our balance sheet under some pressure and we significantly increased
inventory levels whilst taking steps to reduce output as efficiently as
possible. We have successfully addressed these pressures in 2024 as we reduced
our net debt whilst still spending over £20m on our strategic capital
projects. We expect a further reduction of both net debt and leverage in 2025.
DIVIDEND
Our established dividend policy had been to distribute 55% of our adjusted
earnings. In light of current trading conditions and the Group's presently
elevated levels of leverage, the Board has considered the Group's dividend
policy and has elected to temporarily reduce the level of dividend
distribution. The Board is proposing to distribute 40% of adjusted earnings
for 2024 and accordingly is recommending a final dividend of 2.0p per share
(2023: 2.0p) which, in addition to the interim dividend of 1.0p per share paid
in October (2023: 2.4p), will bring the total dividend to 3.0p per share
(2023: 4.4p). Subject to approval by shareholders, the final dividend will be
paid on 4 July 2025 to shareholders on the register as at 13 June 2025.
The Board remains confident in the long-term prospects of the Group and in its
ability to benefit from the recent capacity investments as the market
recovers. The Board expects borrowings to steadily reduce as our markets
recover and our £140m programme of strategic capital investment draws to a
conclusion. The Board intends to keep its dividend policy under review and
will look to return the level of distribution to the previous 55% as soon as
market conditions and the balance sheet permit.
SUSTAINABILITY
Our carbon reduction journey is a long-term one, underpinned by strategic
investment in our manufacturing footprint, with continuing research and
development into emerging technologies. This journey to decarbonisation and
ultimately to net zero needs to be considered alongside short-term factors
that influence our carbon emissions.
In addition to our long-term goal of achieving net zero by 2050, we have clear
short to mid-term targets including a 32% reduction in our carbon emissions
intensity (from a 2019 baseline) by the end of the decade. At present we are
reporting a significant reduction in our absolute carbon emissions both
against a 2019 baseline and in comparison with the prior year, as we have
significantly reduced our output, however our carbon emission intensity
suffers as a result of the operating inefficiency we are presently carrying.
Each of our strategic products provides a measurable and meaningful
sustainability gain, with the new Desford and Wilnecote brick factories both
reducing carbon emissions by approximately 25% relative to their predecessor
factories. Our innovative brick slip production facility at Accrington will
manufacture brick slips with around a 75% reduction in both energy and raw
material usage as well as embodied carbon relative to traditional bricks.
During 2024 we have made significant strides in utilising calcined clay
derived from our London Brick production waste as a low carbon cement
substitute. 2024 also saw the commencement of power generation from our
dedicated solar farm which is designed to provide around 70% of our
electricity demand at full production.
HEALTH, SAFETY AND WELLBEING
Safety has long been the Group's number one priority and this has not changed.
Nothing comes before the safety and wellbeing of not only our colleagues, but
everybody that we come across in the course of running our business.
2024 was the final year of our planned zero harm strategy that we set out in
2021. Aligned to our cultural drive to enhance engagement, in this final year,
we focused on launching our programme of visible felt leadership (VFL)
training, training our leaders to have effective safety conversations. In this
three-year period we have seen our lost time incident frequency rate (LTIFR)
reduce by 43%. Our ambition is to achieve zero harm and we will not rest
whilst we still have accidents and injuries happening in our business.
We have now embarked on the next phase of our journey which focuses on
behavioural safety titled 'From base to brilliant' incorporating the rollout
of a full behavioural health and safety programme through the business.
Starting at the 'base', where 'we do the right thing' then moving to taking
responsibility through a dependent safety culture where colleagues actively
look after their own health and safety, through to the 'brilliant' where
colleagues will actively look after their own and others health, safety and
wellbeing.
BOARD CHANGES
As previously announced, Justin Atkinson will stand down as Chair at the
conclusion of the forthcoming AGM. Nigel Lingwood will be joining the Board as
Chair Designate on 1 April 2025 and he shall be appointed as Chair on
conclusion of the AGM in May. Nigel is an experienced listed company director
and chair who spent the largest part of his executive career as Group Finance
Director of FTSE 100 value-add distribution business Diploma Plc, and now is
Chair of FTSE 250 ventilation products business, Volution Group Plc.
In addition, we also said goodbye to Divya Seshamani during the year as she
stood down as a Non-Executive Director in September after more than eight
years of service. We would like to take this opportunity to pass on our
thanks to Divya for her significant contribution during her tenure and the
Board wish her every success in the future.
As announced on 6 March 2025, Aysegul Sabanci will join the Board on 1 April
2025 as an Independent Non-Executive Director. Aysegul was previously Group
Head of Procurement at ISG and a Non-Executive Director at T Clarke plc and
brings a strong background in relevant industry procurement.
CORPORATE CULTURE
The Board is aware of its responsibility to foster a corporate culture based
upon strong leadership and transparency, ensuring we do business responsibly,
adhering to the highest ethical standards, whilst minimising the impact our
business has on the environment. Our corporate values, being the principles
of behaviour that will allow us to achieve our strategic goals, are defined
below and having been rolled out to all employees in early 2024, our focus has
been on building adherence to these values in everything we do:
• Innovate to lead: We're empowered to continuously improve;
• Pride in excellence: We relish achievement and success; and
• Collaborate and care: We work in partnership and look after each
other.
Our purpose is to manufacture and supply building products used to construct
homes and other structures, helping to create lasting legacies in the form of
communities that will exist for centuries to come.
GOING CONCERN
The Group's debt facility comprises a committed revolving credit facility
(RCF) of £170m extending to January 2027 with an option for an extension to
June 2028 subject to lender consent. The option is available to be requested
in the period from 17 March to 16 April 2025. At the balance sheet date,
borrowings against the facility totalled £100m with £70m of headroom
remaining. The cash balance stood at £15.2m with reported net debt before
leases of £84.9m (2023: £93.2m) (net debt is presented inclusive of
capitalised arrangement fees). The Group also benefits from an uncommitted
overdraft facility of £10m which was undrawn at the year end.
The Group meets its working capital requirements through these cash reserves
and facilities and closely manages working capital to ensure sufficient daily
liquidity and prepares financial forecasts under various scenarios to ensure
sufficient liquidity over the medium-term. Management maintains strong
relationships with the Group's lenders and advisors and remains confident in
the Group's ability to continue to access the financing it requires.
The facility is normally subject to covenant restrictions of leverage (net
debt/EBITDA) (as measured before leases) of less than 3 times and interest
cover of greater than 4 times. However, given the combination of the Group's
reduced EBITDA and increases in net debt in 2023, driven by inventory build,
capital outflows and higher interest rates, amended covenants were agreed with
the Group's lenders in March 2024 to provide additional headroom during 2024
and to March 2025. Quarterly covenant testing was introduced for the period of
these amended covenants. Accordingly, the Group's leverage covenant for March
2025 is set at 3.75 times, with interest cover at 3 times. The covenants
return to normal levels from June 2025 with testing reverting to half yearly.
The Group has comfortably traded with its original covenants throughout 2024
and anticipates remaining within these covenants throughout 2025.
Management has modelled two financial scenarios for the period to 30 June
2026, comprising a base case and a plausible downside scenario, reflecting
both macroeconomic and industry-specific projections. In addition to this, a
reverse stress test has also been modelled.
Assumptions underpinning these scenarios are outlined as follows:
• The base case scenario is aligned to our current demand
expectations, with short-term market conditions improving in 2025, reflected
in sales volume growth;
• Following the production reductions made in 2023, management
continues to align production to anticipated sales, minimising inventory
growth. This in turn increases free cash flows and facilitates a reduction net
debt;
• Capital expenditure reduces from prior years, with the Group's
spend on strategic projects largely complete. As above, this increases free
cash flows and reduces net debt; and
• As in the prior year, the Group's plausible downside scenario
takes into account the current levels of market demand which, for most of our
products, remains approximately 30% below the levels last seen in 2022. 2022
is considered to be representative of a normalised market for the Group and as
such is seen as a reasonable benchmark for scenario modelling. It is not
considered plausible that demand could fall further than the assumptions
detailed within the downside scenario laid out below.
Scenario Sales volume assumptions Management mitigations
Base Volumes for 2025 increase, for the majority of products, between 6% and 11%, None necessary
versus 2024. However these remain between 3% and 32% below 2022. Volumes
continue to recover in 2026 but remain up to 23% below 2022
Plausible downside Volumes remain flat in 2025 versus 2024, which is a reduction of between 11% None necessary
and 38% relative to 2022. Volumes begin to recover in 2026 but remain up to
35% below 2022
Under both of the above scenarios, there is no breach in covenants throughout
2025 and in the period up to June 2026.
In addition to the scenarios, the Group has prepared a reverse stress test to
determine the level of market decline that could potentially breach covenants,
before further mitigating actions are taken. The reverse stress test
indicated, that should volumes fall by a further 8% from the plausible
downside, the Group would be at risk of breaching its covenants. This is
viewed by the Board to be a highly unlikely scenario. The Board takes
encouragement from the Government's ambition to materially increase
housebuilding, although remains wary of the challenges in delivering this. A
steady recovery in the market is anticipated during 2025 and the Board remains
confident in the Group's ability to benefit significantly as markets recover
and its strategic investments generate returns.
Further to this, in the event of sales volumes falling in line with those
modelled in the reverse stress test, the Group would seek to enact further
mitigating actions including additional cost savings, production reductions,
curtailment in the quantum of dividend distributions and the sale of surplus
land and buildings.
Taking the above into consideration, alongside trading performance for the
first two months of 2025 which has continued the positive trends seen in the
last quarter of 2024, with our brick volumes around 17% ahead of the prior
year, the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the going concern period to
30 June 2026. The Group therefore adopts the going concern basis in preparing
this consolidated financial information.
FORWARD LOOKING STATEMENTS
Certain statements in this announcement are forward looking. Although the
Group believes that the expectations reflected in these forward-looking
statements are reasonable, we can give no assurance that these expectations
will prove to have been correct. Because these statements contain risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements. We undertake no obligation to
update any forward-looking statements, whether as a result of new information,
future events or otherwise.
DIRECTORS' RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
1. the Consolidated Financial Statements of the Group, which have been
prepared in accordance with UK-adopted international accounting standards in
conformity with the requirements of the Companies Act 2006 give a true and
fair view of the assets, liabilities, financial position and profit of the
Group; and
1. the announcement includes a fair review of the development and
performance of the business and the position of the Group, together with a
description of the principal risks and uncertainties that it faces.
Neil Ash Ben Guyatt
Chief Executive Officer Chief Financial Officer
11 March 2025
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2024
Note 2024 2023
£m £m
Revenue 3 344.3 346.4
Cost of sales (241.3) (245.7)
Gross profit 103.0 100.7
Distribution costs (46.1) (48.6)
Administrative expenses (29.4) (28.5)
Other operating income 6.4 0.5
Operating profit 33.9 24.1
Finance expense 5 (9.1) (7.0)
Profit before tax 24.8 17.1
Income tax expense 6 (7.3) (4.3)
Profit for the financial year attributable to equity shareholders 17.5 12.8
Other comprehensive loss
Effective portion of changes of cash flow hedges (net of tax impact) (0.1) (0.7)
Total comprehensive income for the year attributable to equity shareholders 17.4 12.1
Earnings per share Pence Pence
Basic earnings 8 8.3 6.2
Diluted earnings 8 8.3 6.2
Note 2024 2023
£m £m
Adjusted profit measures
Adjusted EBITDA 52.0 58.1
Exceptional items 4 (2.9) (14.0)
Adjusting items 14 5.6 -
EBITDA 54.7 44.1
Depreciation and amortisation (20.8) (20.0)
Operating profit 33.9 24.1
Adjusted profit before tax 22.1 31.1
Exceptional items 4 (2.9) (14.0)
Adjusting items 14 5.6 -
Profit before tax 24.8 17.1
Adjusted earnings per share Pence Pence
Basic earnings 8 7.6 11.4
Diluted earnings 8 7.6 11.3
FORTERRA PLC CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2024
Note 2024 2023
£m £m
Non-current assets
Intangible assets 11.6 19.2
Property, plant and equipment 263.8 249.7
Right-of-use assets 20.5 24.1
Derivative financial assets 2.8 5.0
298.7 298.0
Current assets
Inventories 82.0 95.8
Trade and other receivables 39.0 31.0
Income tax asset 2.4 2.3
Cash and cash equivalents 15.2 16.0
Derivative financial assets 5.1 1.6
143.7 146.7
Total assets 442.4 444.7
Current liabilities
Trade and other payables (68.7) (66.3)
Loans and borrowings 9 (0.7) (0.4)
Lease liabilities (5.8) (5.7)
Provisions for other liabilities and charges (6.6) (15.7)
Derivative financial liabilities (0.1) (5.8)
(81.9) (93.9)
Non-current liabilities
Loans and borrowings 9 (99.4) (108.8)
Lease liabilities (15.1) (18.5)
Provisions for other liabilities and charges (8.2) (9.4)
Deferred tax liabilities (12.9) (6.3)
(135.6) (143.0)
Total liabilities (217.5) (236.9)
Net assets 224.9 207.8
Capital and reserves attributable to equity shareholders
Ordinary shares 2.1 2.1
Retained earnings 228.2 219.8
Cash flow hedge reserve (0.2) (0.1)
Reserve for own shares (5.4) (14.2)
Capital redemption reserve 0.2 0.2
Total equity 224.9 207.8
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2024
Note 2024 2023
£m £m
Cash generated from/(used in) operations 10 51.8 (11.2)
Interest paid (10.0) (6.1)
Tax credit/(paid) 0.4 (2.7)
Net cash inflow/(outflow) from operating activities 42.2 (20.0)
Cash flows from investing activities
Purchase of property, plant and equipment (25.4) (33.0)
Purchase of intangible assets (0.2) (1.1)
Proceeds from sale of property, plant and equipment - 0.3
Net cash used in investing activities (25.6) (33.8)
Cash flows from financing activities
Repayment of lease liabilities (5.9) (5.9)
Dividends paid 7 (6.3) (25.7)
Drawdown of borrowings 93.0 137.0
Repayment of borrowings (103.0) (67.0)
Purchase of shares by Employee Benefit Trust - (2.1)
Proceeds from sales of shares by Employee Benefit Trust 5.1 1.1
Financing fees (0.3) (1.9)
Net cash (used in)/generated from financing activities (17.4) 35.5
Net decrease in cash and cash equivalents (0.8) (18.3)
Cash and cash equivalents at the beginning of the period 16.0 34.3
Cash and cash equivalents at the end of the period 15.2 16.0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2024
Note Ordinary shares Capital redemption reserve Reserve for own shares Cash flow hedge reserve Retained earnings Total
£m £m £m £m £m equity
£m
Balance at 1 January 2023 2.1 0.2 (15.8) 0.6 233.4 220.5
Profit for the year - - - - 12.8 12.8
Other comprehensive loss - - - (0.7) - (0.7)
Total comprehensive (loss)/income for the year - - - (0.7) 12.8 12.1
Dividends paid 7 - - - - (25.7) (25.7)
Purchase of shares by Employee Benefit Trust - - (2.1) - - (2.1)
Proceeds from sale of shares by Employee Benefit Trust - - 1.1 - - 1.1
Share-based payments charge - - - - 1.7 1.7
Share-based payments exercised - - 2.6 - (2.6) -
Tax on share-based payments - - - - 0.2 0.2
Balance at 31 December 2023 2.1 0.2 (14.2) (0.1) 219.8 207.8
Note Ordinary shares Capital redemption reserve Reserve for own share Cash flow hedge reserve Retained earnings Total equity
£m
£m
£m
£m
£m
£m
Balance at 1 January 2024 2.1 0.2 (14.2) (0.1) 219.8 207.8
Profit for the year - - - - 17.5 17.5
Other comprehensive loss - - - (0.1) - (0.1)
Total comprehensive (loss)/income for the year - - - (0.1) 17.5 17.4
Dividends paid 7 - - - - (6.3) (6.3)
Proceeds from sale of shares by Employee Benefit Trust - - 5.1 - - 5.1
Share-based payments charge - - - - 1.0 1.0
Share-based payments exercised - - 3.7 - (3.7) -
Tax on share-based payments - - - - (0.1) (0.1)
Balance at 31 December 2024 2.1 0.2 (5.4) (0.2) 228.2 224.9
1. General information
Forterra plc (Forterra or the Company) and its subsidiaries (together referred
to as the Group) are domiciled in the United Kingdom. The address of the
registered office of the Company and its subsidiaries is 5 Grange Park Court,
Roman Way, Northampton, NN4 5EA. The Company is the parent of Forterra
Holdings Limited and Forterra Building Products Limited, which together
comprise the Group. The principal activity of the Group is the manufacture and
sale of bricks, dense and lightweight blocks, precast concrete, concrete block
paving and other complementary building products.
Forterra plc was incorporated on 21 January 2016 for the purpose of listing
the Group on the London Stock Exchange. Forterra plc acquired the shares of
Forterra Building Products Limited on 20 April 2016, which to that date held
the Group's trade and assets, before admission to the main market of the
London Stock Exchange.
2. Basis of preparation
The consolidated financial information for the year ended 31 December 2024 has
been extracted from the audited consolidated financial statements, which were
approved by the Board of Directors on 11 March 2025. The audited consolidated
financial statements have not yet been delivered to the Registrar of Companies
but are expected to be published in March 2025 and will be available on our
website https://www.forterra.co.uk/. The auditors have reported on those
accounts; their report was unqualified and did not contain statements under
s498(2) or (3) of the Companies Act 2006.
This consolidated financial information has been prepared in accordance with
UK-adopted international accounting standards. Whilst the financial
information included in this preliminary announcement has been prepared in
accordance with IFRS, this announcement does not itself contain sufficient
information to comply with IFRS. This preliminary announcement constitutes a
dissemination announcement in accordance with Section 6.3 of the Disclosures
and Transparency Rules (DTR).
The financial information set out in this announcement does not constitute the
statutory accounts for the Group within the meaning of Sections 434 to 436 of
the Companies Act 2006 and is an abridged version of the consolidated
financial statements for the year ended 31 December 2024. Copies of the Annual
Report for the year ended 31 December 2024 will be mailed to those
shareholders who have opted to receive them by the end of April 2025 and will
be available from the Company's registered office at Forterra plc, 5 Grange
Park Court, Northampton and the Company's website (http://forterraplc.co.uk/)
after that date.
The consolidated financial information are presented in pounds sterling and
all values are rounded to the nearest hundred thousand unless otherwise
indicated.
Going concern
The Group's debt facility comprises a committed revolving credit facility
(RCF) of £170m extending to January 2027 with an option for an extension to
June 2028 subject to lender consent. The option is available to be requested
in the period from 17 March to 16 April 2025. At the balance sheet date,
borrowings against the facility totalled £100m with £70m of headroom
remaining. The cash balance stood at £15.2m with reported net debt before
leases of £84.9m (2023: £93.2m) (net debt is presented inclusive of
capitalised arrangement fees). The Group also benefits from an uncommitted
overdraft facility of £10m which was undrawn at the year end.
The Group meets its working capital requirements through these cash reserves
and facilities and closely manages working capital to ensure sufficient daily
liquidity and prepares financial forecasts under various scenarios to ensure
sufficient liquidity over the medium-term. Management maintains strong
relationships with the Group's lenders and advisors and remains confident in
the Group's ability to continue to access the financing it requires.
The facility is normally subject to covenant restrictions of leverage (net
debt/EBITDA) (as measured before leases) of less than 3 times and interest
cover of greater than 4 times. However, given the combination of the Group's
reduced EBITDA and increases in net debt in 2023, driven by inventory build,
capital outflows and higher interest rates, amended covenants were agreed with
the Group's lenders in March 2024 to provide additional headroom during 2024
and to March 2025. Quarterly covenant testing was introduced for the period of
these amended covenants. Accordingly, the Group's leverage covenant for March
2025 is set at 3.75 times, with interest cover at 3 times. The covenants
return to normal levels from June 2025 with testing reverting to half yearly.
The Group has comfortably traded with its original covenants throughout 2024
and anticipates remaining within these covenants throughout 2025.
Management has modelled two financial scenarios for the period to 30 June
2026, comprising a base case and a plausible downside scenario, reflecting
both macroeconomic and industry-specific projections. In addition to this, a
reverse stress test has also been modelled.
Assumptions underpinning these scenarios are outlined as follows:
• The base case scenario is aligned to our current demand
expectations, with short-term market conditions improving in 2025, reflected
in sales volume growth;
• Following the production reductions made in 2023, management
continues to align production to anticipated sales, minimising inventory
growth. This in turn increases free cash flows and facilitates a reduction net
debt;
• Capital expenditure reduces from prior years, with the Group's
spend on strategic projects largely complete. As above, this increases free
cash flows and reduces net debt; and
• As in the prior year, the Group's plausible downside scenario
takes into account the current levels of market demand which, for most of our
products, remains approximately 30% below the levels last seen in 2022. 2022
is considered to be representative of a normalised market for the Group and as
such is seen as a reasonable benchmark for scenario modelling. It is not
considered plausible that demand could fall further than the assumptions
detailed within the downside scenario laid out below.
Scenario Sales volume assumptions Management mitigations
Base Volumes for 2025 increase, for the majority of products, between 6% and 11%, None necessary
versus 2024. However these remain between 3% and 32% below 2022. Volumes
continue to recover in 2026 but remain up to 23% below 2022
Plausible downside Volumes remain flat in 2025 versus 2024, which is a reduction of between 11% None necessary
and 38% relative to 2022. Volumes begin to recover in 2026 but remain up to
35% below 2022
Under both of the above scenarios, there is no breach in covenants throughout
2025 and in the period up to June 2026.
In addition to the scenarios, the Group has prepared a reverse stress test to
determine the level of market decline that could potentially breach covenants,
before further mitigating actions are taken. The reverse stress test
indicated, that should volumes fall by a further 8% from the plausible
downside, the Group would be at risk of breaching its covenants. This is
viewed by the Board to be a highly unlikely scenario. The Board takes
encouragement from the Government's ambition to materially increase
housebuilding, although remains wary of the challenges in delivering this. A
steady recovery in the market is anticipated during 2025 and the Board remains
confident in the Group's ability to benefit significantly as markets recover
and its strategic investments generate returns.
Further to this, in the event of sales volumes falling in line with those
modelled in the reverse stress test, the Group would seek to enact further
mitigating actions including additional cost savings, production reductions,
curtailment in the quantum of dividend distributions and the sale of surplus
land and buildings.
Taking the above into consideration, alongside trading performance for the
first two months of 2025 which has continued the positive trends seen in the
last quarter of 2024, with our brick volumes around 17% ahead of the prior
year, the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the going concern period to
30 June 2026. The Group therefore adopts the going concern basis in preparing
this consolidated financial information.
3. Segmental reporting
Management has determined the operating segments based on the management
reports reviewed by the Executive Committee that are used to assess both
performance and strategic decisions. Management has identified that the
Executive Committee is the chief operating decision maker in accordance with
the requirements of IFRS 8 'Operating segments'.
The Executive Committee considers the business to be split into three
operating segments: Bricks, Blocks and Bespoke Products.
The principal activity of the operating segments are:
• Bricks: Manufacture and sale of bricks to the
construction sector;
• Blocks: Manufacture and sale of concrete blocks and
permeable block paving to the construction sector; and
• Bespoke Products: Manufacture and sale of bespoke
products to the construction sector.
The Executive Committee considers that for reporting purposes, the operating
segments above can be aggregated into two reporting segments: Bricks and
Blocks and Bespoke Products. The aggregation of Bricks and Blocks is due to
these operating segments having similar long-term average margins, production
processes, suppliers, customers and distribution methods.
The Bespoke Products range includes precast concrete (marketed under the
'Bison Precast' brand), chimney and roofing solutions, each of which are
typically made-to-measure or customised to meet the customer's specific needs.
The precast concrete products are complemented by the Group's full design and
nationwide installation services.
Costs which are incurred on behalf of both segments are held at the centre
and these, together with general administrative expenses, are allocated to the
segments for reporting purposes using a split of 80% Bricks and Blocks and 20%
Bespoke Products. Management considers that this is an appropriate basis for
the allocation.
The revenue recognised in the Consolidated Statement of Total Comprehensive
Income is all attributable to the principal activity of the manufacture and
sale of bricks, both dense and lightweight blocks, precast concrete, concrete
paving and other complementary building products.
Substantially all revenue recognised in the Consolidated Statement of Total
Comprehensive Income arose within the UK
Segment revenue and results
2024 2023
Note Bricks and Blocks Bespoke Products Total Bricks and Blocks Bespoke Products Total
£m £m £m £m £m £m
Segment revenue 276.7 71.5 348.2 277.4 72.7 350.1
Inter-segment eliminations (3.9) (3.7)
Revenue 344.3 346.4
EBITDA before adjusted items 49.0 3.0 52.0 52.1 6.0 58.1
Depreciation and amortisation (19.1) (1.7) (20.8) (18.6) (1.4) (20.0)
Operating profit before adjusted items 29.9 1.3 31.2 33.5 4.6 38.1
Allocated exceptional items 4 (0.1) (0.1) (0.2) (13.7) (0.3) (14.0)
Unallocated exceptional items 4 (2.7) -
Allocated adjusting items 14 5.6 - 5.6 - - -
Operating profit 33.9 24.1
Finance expense 5 (9.1) (7.0)
Profit before tax 24.8 17.1
Segment assets
2024 2023
Bricks and Blocks Bespoke Products Total Bricks and Blocks Bespoke Products Total
£m £m £m £m £m £m
Intangible assets 9.7 1.9 11.6 16.8 2.4 19.2
Property, plant and equipment 255.4 8.4 263.8 240.8 8.9 249.7
Right-of-use assets 19.4 1.1 20.5 22.9 1.2 24.1
Inventories 79.0 3.0 82.0 92.1 3.7 95.8
Segment assets 363.5 14.4 377.9 372.6 16.2 388.8
Unallocated assets 64.5 55.9
Total assets 442.4 444.7
Property, plant and equipment, intangible assets, right-of-use assets and
inventories are allocated to segments and considered when appraising segment
performance. Trade and other receivables, income tax assets, cash and cash
equivalents and derivative assets are centrally controlled and unallocated.
Other segment information
2024 2023
Bricks and Blocks Bespoke Products Total Bricks and Blocks Bespoke Products Total
£m £m £m £m £m £m
Intangible asset additions 0.1 - 0.1 5.3 0.8 6.1
Property, plant and equipment additions 27.7 0.2 27.9 32.6 0.9 33.5
Right-of-use asset additions 2.5 0.2 2.7 11.2 1.1 12.3
Customers representing 10% or greater of revenues
2024 2023
Bricks and Blocks Bespoke Products Total Bricks and Blocks Bespoke Products Total
£m £m £m £m £m £m
Customer A 35.6 0.4 36.0 40.1 0.2 40.3
4. Exceptional items
2024 2023
£m
£m
Restructuring costs (0.2) (9.0)
Aborted corporate transaction (2.7) -
Impairment of plant and equipment - (5.0)
(2.9) (14.0)
2024 exceptional items
During the year, the Group incurred exceptional expenses of £2.9m, of which
£0.2m relates to restructuring costs and £2.7m relates to professional fees
associated with an aborted corporate transaction.
2023 exceptional items
Exceptional items in 2023 relate to costs associated with the restructuring of
our operations. Restructuring activities were undertaken to reduce output in
response to the decline in demand for our products. Cash restructuring costs
totalled £9.0m, of which £8.8m related to redundancies and terminations
made across the Group. In addition to this, non-cash impairment losses of
£5.0m were recognised in respect of the carrying value of plant and equipment
at the Howley Park and Claughton brick factories which were mothballed in the
year.
Presentation of exceptional items
Cost of sales Distribution costs Administrative expenses Total
£m £m £m £m
2024
Restructuring costs (0.1) - (0.1) (0.2)
Aborted corporate transaction - - (2.7) (2.7)
(0.1) - (2.8) (2.9)
2023
Restructuring costs (7.0) (1.6) (0.4) (9.0)
Impairment of plant and equipment (5.0) - - (5.0)
(12.0) (1.6) (0.4) (14.0)
Tax on exceptional items
The restructuring costs incurred in the year, including redundancies and legal
costs, were tax deductible.
5. Finance expense
2024 2023
£m
£m
Interest payable on loans and borrowings 7.4 5.7
Interest payable on lease liabilities 1.0 0.7
Other finance expenses 0.1 -
Amortisation of capitalised financing costs 0.6 0.6
9.1 7.0
Interest payable on loans and borrowings is presented net of borrowings costs
which have been capitalised against qualifying assets. In the year to 31
December 2024 interest of £2.1m (2023: £nil) was capitalised against
qualifying assets, with an average capitalisation rate of 6.6%.
Tax relief has been claimed on capitalised interest at the UK main rate of
25%.
6. Taxation
2024 2023
£m
£m
Current tax
UK corporation tax on profit for the year 3.2 3.5
Prior year adjustment on UK corporation tax (2.4) (0.7)
Total current tax 0.8 2.8
Deferred tax
Origination and reversal of temporary differences 4.1 0.9
Effect of changes in tax rates - 0.1
Effect of prior period adjustments 2.4 0.5
Total deferred tax 6.5 1.5
Income tax expense 7.3 4.3
2024 2023
£m
£m
Current tax
Profit before taxation 24.8 17.1
Expected tax charge 6.2 4.0
Expenses not deductible for tax purposes 1.1 0.4
Effect of prior period adjustments - (0.1)
Effect of change on deferred tax rate - -
Income tax expense 7.3 4.3
The effective tax rate (ETR) used for statutory measures is 29.5% (2023:
25.0%) and the adjusted ETR is 27.1% (2023: 24.5%). Deferred tax is calculated
at the rate at which the provision is expected to reverse. The UK main rate of
corporation tax increased to 25% on 1 April 2023. There has been no change in
the Finance Bill 2023.
7. Dividends
2024 2023
£m
£m
Amounts recognised as distributions to equity holders in the year
Interim dividend of 1.0p per share (2023: 2.4p) 2.1 4.9
Final dividend of 2.0p per share in respect of prior year (2023: 10.1p) 4.2 20.8
6.3 25.7
The Directors are proposing a final dividend for 2024 of 2.0p per share,
making a total payment for the year of 3.0p (2023: 4.4p). This is subject to
approval by the shareholders at the AGM and has not been included as a
liability in this consolidated financial information.
8. Earnings per share
The calculation of earnings per Ordinary Share is based on profit or loss
after tax and the weighted average number of Ordinary shares in issue during
the year. Adjusted earnings per share is presented as an alternative
performance measure to provide an additional year-on-year comparison. A
reconciliation between adjusted and statutory results is presented within note
14.
For diluted earnings per share, the weighted average number of Ordinary shares
in issue is adjusted to assume conversion of all dilutive potential Ordinary
shares. The Group has four types of dilutive potential Ordinary shares: those
share options granted to employees under the Sharesave scheme; unvested
shares granted under the Deferred Annual Bonus Plan; unvested shares granted
under the Share Incentive Plan; and unvested shares within the Performance
Share Plan that have met the relevant performance conditions at the end of the
reporting period. If, for any of the above schemes, the average share price
for the year is lower than the option price, these shares become
anti-dilutive and are excluded from the calculation.
Adjusted Statutory
Note 2024 2023 2024 2023
£m £m £m £m
Operating profit for the year 31.2 38.1 33.9 24.1
Finance expense 5 (9.1) (7.0) (9.1) (7.0)
Profit before tax 22.1 31.1 24.8 17.1
Income tax expense 6 (6.0) (7.6) (7.3) (4.3)
Profit for the financial year 16.1 23.5 17.5 12.8
Weighted average number of shares (millions) 210.6 206.6 210.6 206.6
Effect of share incentive awards and options (millions) 0.7 1.4 0.7 1.4
Diluted weighted average number of shares (millions) 211.3 208.0 211.3 208.0
Earnings per share Pence Pence Pence Pence
Basic earnings 7.6 11.4 8.3 6.2
Diluted earnings 7.6 11.3 8.3 6.2
Adjusted earnings per share is presented as an APM and is calculated by
excluding both exceptional and adjusting items as detailed within note 14 to
this consolidated financial information. The associated adjusted tax charge is
calculated using the rate excluding these exceptional and adjusting items,
being 27.1% (2023: 24.5%).
9. Loans and borrowings
2024 2023
£m
£m
Current loans and borrowings:
Interest 0.7 0.4
Non-current loans and borrowings:
Capitalised financing costs (0.6) (1.2)
Revolving credit facility 100.0 110.0
100.1 109.2
The Group's credit facility comprises a committed revolving credit facility
(RCF) of £170m extending to January 2027 with an option for an extension to
June 2028 subject to lender consent. The Group also benefits from an
uncommitted overdraft facility of £10.0m.
Interest is calculated using SONIA plus a margin, with the margin grid ranging
from 1.65% at a leverage of less than 0.5 times, to 3.5% where leverage is
between 3.5 times and 4 times (in line with the covenant relaxations outlined
below).
The facility is normally subject to covenant restrictions of net debt/EBITDA
(as measured before the impact of IFRS 16) of less than 3 times and interest
cover of greater than 4 times.
The business has traded comfortably within these covenants throughout 2024,
although in order to ensure a sufficient degree of headroom during 2024,
amended covenants were agreed with the Group's lenders. Accordingly, the
Group's leverage covenant was increased to 3.75 times in December 2024, with
interest cover decreasing to 3 times. In addition, quarterly covenant testing
was introduced for the period of the covenant relaxation. As such, in March
2025 leverage is set at 3.75 times and interest cover at 3 times. The
covenants return to normal levels from June 2025 with testing reverting to
half yearly.
In line with the above, the existing restriction prohibiting the declaration
or payment of dividends should leverage exceed 3 times EBITDA was amended to 4
times EBITDA in 2024. This will return to 3 times in 2025.
The facility is linked to our sustainability targets with the opportunity to
adjust the margin by 5 bps subject to achieving annual sustainability targets
covering decarbonisation, plastic reduction and increasing the number of
employees in earn and learn positions. These targets were not achieved in 2023
or 2024. Further information is included in our Sustainability Report within
the Annual Report and Accounts for the Group, due to be published in March
2025.
The facility remains secured by fixed charges over the shares of Forterra
Building Products Limited and Forterra Holdings Limited.
10. Notes to the Consolidated Statement of Cash Flows
2024 2023
£m £m
Cash flows from operating activities
Profit before tax 24.8 17.1
Finance expense 5 9.1 7.0
Exceptional items 4 2.9 14.0
Adjusting items 14 (5.6) -
Operating profit before adjusted items 31.2 38.1
Adjustments for:
Depreciation and amortisation 20.8 20.0
Loss on disposal of property, plant and equipment and right-of use assets - 0.2
Movement in provisions (5.6) (2.9)
Purchase of carbon credits - (5.2)
Settlement of carbon credits 6.0 8.3
Share-based payments 1.0 0.9
Other non-cash items (1.9) (2.3)
Changes in working capital:
Inventories 13.8 (52.8)
Trade and other receivables (8.0) 13.3
Trade and other payables 2.8 (22.9)
Adjusted cash generated from/(used in) operations 60.1 (5.3)
Cash flows relating to operating exceptional items (6.5) (5.1)
Cash flows relating to operating adjusting items (1.8) (0.8)
Cash generated from/(used in) from operations 51.8 (11.2)
11. Net debt
2024 2023
£m £m
Cash and cash equivalents 15.2 16.0
Loans and borrowings (100.1) (109.2)
Lease liabilities (20.9) (24.2)
Net debt (105.8) (117.4)
Reconciliation of net debt
Note 2024 2023
£m £m
Adjusted cash flow generated from/(used in) operations 60.1 (5.3)
Payments made in respect of exceptional items (6.5) (5.1)
Payments made in respect of adjusting items (1.8) (0.8)
Cash flow generated from/(used in) operations 51.8 (11.2)
Interest paid (10.0) (6.1)
Tax paid 0.4 (2.7)
Net cash outflow from investing activities (25.6) (33.8)
Dividends paid 7 (6.3) (25.7)
Purchase of shares by Employee Benefit Trust - (2.1)
Proceeds from sale of shares by Employee Benefit Trust 5.1 1.1
New lease liabilities (2.7) (12.3)
Other financing movement (1.1) (0.7)
Decrease/(Increase) in net debt 11.6 (93.5)
Net debt at the start of the period (117.4) (23.9)
Net debt at the end of the period (105.8) (117.4)
12. Financial instruments
Forward purchased energy contracts
The substantial energy requirements of the Group are closely managed to ensure
that the impact of fluctuating energy costs can be removed as far as possible;
allowing management to have some certainty over likely energy costs and
providing a reasonable basis on which to budget. Contracts with energy
suppliers are entered into allowing prices to be fixed, by month, for volumes
the Group expects to use. Under normal circumstances, the Group takes delivery
of and consumes all of the gas and electricity under each contract, and in
doing so satisfies the requirements under IFRS 9 to follow the own use
exemption in accounting for these. As such, the costs associated with the
purchase of gas and electricity are accounted for in the Statement of Total
Comprehensive Income at the point of consumption, and contracts are not held
at fair value.
The decline in market conditions during 2023, and subsequent reductions made
to production across the Group, resulted in open forward contracts for some
periods where the committed volume of gas will exceed budgeted total
consumption. In these instances, the quantities which have been 'over
purchased' will be sold back to the market, crystallising a realised gain or
loss. As was the case at 31 December 2023, any open contracts where management
expects to sell surplus gas back to the market fail the own use exemption, and
in accordance with IFRS 9, are accounted for as derivatives. As at 31 December
2024 the Group has recognised a current asset of £5.1m (2023: £1.6m) and a
non-current asset of £2.8m (2023: £5.0m) in relation to these contracts. The
values are calculated with reference to all forward purchased contracts within
which a sale back to the market is expected to occur, and reflect not only the
portion of such contracts expected to be sold, but also the fair value of the
remaining quantity which is expected to be consumed by the Group during the
normal course of business.
For the purposes of internal reporting to management and the Board, the Group
continues to measure these contracts as if the own use exemption could still
be applied, recognising energy costs at the contracted rate in the period of
consumption. In order to allow users of the accounts to review this
operationally aligned reporting, the movement due to the fair value treatment
of energy derivatives since 31 December 2023, being £7.1m, has been presented
as an adjusting item in this consolidated financial information.
The Group has not historically, and has no future plans to intentionally
purchase gas or electricity to sell and these current circumstances are solely
the result of market conditions.
13. Related party transactions
Transactions with key management personnel
Key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the Group. The
Directors of the Company and the Directors of the Group's subsidiary companies
fall within this category.
2024 2023
£m £m
Emoluments including taxable benefits 2.7 2.8
Share-based payments 0.7 0.4
Pension and other post-employment benefits 0.2 0.2
3.6 3.4
Information relating to Directors' emoluments, pension entitlements, share
options and long-term incentive plans appear in the Annual Report on
Remuneration within the Annual Report and Accounts, which is expected to be
published in March 2025.
14. Alternative performance measure
APM Definition and/or purpose
Adjusted EBITDA, adjusted EBITDA margin, adjusted operating profit (EBIT), These APMs are calculated by excluding both exceptional and adjusting items
adjusted profit before tax, adjusted earnings per share, adjusted operating
cash flow
Adjusted operating cash conversion Adjusted operating cash conversion is calculated as adjusted operating cash
flow, less capital expenditure (excluding spend on strategic projects),
divided by adjusted operating profit
Net (debt)/cash before leases Net (debt)/cash before leases is presented as the total cash and cash
equivalent and borrowings, inclusive of capitalised financing costs and
excluding lease liabilities at the balance sheet date
Group: Revenue, EBITDA, EBITDA margin, operating profit, profit before tax
Adjusted Exceptional items Exceptional items Adjusting items Adjusting items Statutory
£m £m £m £m £m £m
2024 Restructuring costs Aborted corporate transaction Realised loss on sale of surplus energy Energy contract derivatives
Revenue 344.3 - - - - 344.3
EBITDA 52.0 (0.2) (2.7) (1.5) 7.1 54.7
EBITDA margin % 15.1% - - - - 15.9%
Operating profit (EBIT) 31.2 (0.2) (2.7) (1.5) 7.1 33.9
Profit before tax 22.1 (0.2) (2.7) (1.5) 7.1 24.8
Adjusted Exceptional items Adjusting items Adjusting items Statutory
£m £m £m £m £m
2023 Restructuring and impairment costs Realised loss on sale of surplus energy Energy contract derivatives
Revenue 346.4 - - - 346.4
EBITDA 58.1 (14.0) (0.8) 0.8 44.1
EBITDA margin % 16.8% - - - 12.7%
Operating profit (EBIT) 38.1 (14.0) (0.8) 0.8 24.1
Profit before tax 31.1 (14.0) (0.8) 0.8 17.1
Segmental: Revenue, EBITDA, EBITDA margin
Bricks and Blocks
Adjusted Exceptional items Adjusting items Adjusting items Statutory
£m £m £m £m £m
2024 Restructuring costs Realised loss on sale of surplus energy Energy contract derivatives
Revenue 276.7 - - - 276.7
EBITDA 49.0 (0.1) (1.5) 7.1 54.5
EBITDA margin % 17.7% - - - 19.7%
Adjusted Exceptional items Adjusting items Adjusting items Statutory
£m £m £m £m £m
2023 Restructuring costs Realised loss on sale of surplus energy Energy contract derivatives
Revenue 277.4 - - - 277.4
EBITDA 52.1 (13.7) (0.8) 0.8 38.4
EBITDA margin % 18.8% - - - 13.8%
Bespoke Products
Adjusted Exceptional items Adjusting items Adjusting items Statutory
£m £m £m £m £m
2024 Restructuring costs Realised loss on sale of surplus energy Energy contract derivatives
Revenue 71.5 - - - 71.5
EBITDA 3.0 (0.1) - - 2.9
EBITDA margin % 4.2% - - - 4.1%
Adjusted Exceptional items Adjusting items Adjusting items Statutory
£m £m £m £m £m
2023 Restructuring costs Realised loss on sale of surplus energy Energy contract derivatives
Revenue 72.7 - - - 72.7
EBITDA 6.0 (0.3) - - 5.7
EBITDA margin % 8.3% - - - 7.8%
2024 Adjusted Adjusting items Exceptional items Statutory
£m £m £m £m
EBITDA 52.0 5.6 (2.9) 54.7
Purchase and settlement of carbon credits 6.0 - - 6.0
Other cash flow items(1) (6.5) (7.1) (3.6) (17.2)
Changes in working capital:
- Inventories 13.8 - - 13.8
- Trade and other receivables (8.0) - - (8.0)
- Trade and other payables 2.8 (0.3) - 2.5
Operating cash flow 60.1 (1.8) (6.5) 51.8
15. Post balance sheet events
There were no events which occurred since the balance sheet date that would
merit separate disclosure.
RISK MANAGEMENT AND KEY RISKS
Overview
Effective risk management is critical to successfully meeting our strategic
objectives and delivering long-term value to our shareholders. Instilling a
risk management culture at the core of everything we do is a key priority. Our
risk management policy, strategy, processes, reporting measures, internal
reporting lines and responsibilities are well established.
We continue to monitor this alongside numerous other rapidly evolving business
risks; implementing mitigating controls and actions as appropriate. Details of
our principal key risks are shown further in the table below.
Our risk management objectives remain to:
• Embed risk management into our management culture
and cascade this down through the business;
• Develop plans and make decisions that are supported
by an understanding of risk and opportunity; and
• Anticipate change and respond appropriately.
Sustainability
Sustainability continues to be a key focus within our business with the
increasing need to make Forterra more resilient against the potential effects
of climate change, and evolving sustainability driven risks are highlighted
within extensive disclosure in our Annual Report. These reflect both the
impact of our operations on the environment but also the challenging targets
we have set to reduce this, targeting net zero by 2050.
The Board is committed to compliance with the requirements of the Task Force
on Climate-Related Financial Disclosure (TCFD) and comprehensive disclosure on
both short and long-term climate risks are included in our Sustainability
Report.
Since January 2024, the Board's now standalone Sustainability Committee has
provided oversight and governance over all matters sustainability and climate,
including the risks and opportunities this presents over the short, medium and
long-term.
Key risks
Key risks are determined by applying a standard methodology to all risks,
considering the potential impact and likelihood of a risk event occurring,
before then, considering the mitigating actions in place, their effectiveness,
their potential to be breached and the severity and likelihood of the risk
that remains. This is a robust but straightforward system for identifying,
assessing and managing key risks in a consistent and appropriate manner.
Management of key risks is an ongoing process. Many of the key risks that are
identified and monitored evolve and new risks regularly emerge.
The foundations of the internal control system are the first line controls in
place across all our operations. This first line of control is evidenced
through monthly responsible manager self-assessments and review controls are
scheduled to recur frequently and regularly. Policies, procedures and
frameworks in areas such as health and safety, compliance, quality, IT, risk
management and security represent the second line of controls, and internal
audit activities represent the third.
Management continue to monitor risk closely and put in place procedures to
mitigate risks promptly wherever possible. Where the risks cannot be
mitigated, management focus on monitoring the risks and ensuring the Group
maximises its resilience to the risks, should they fully emerge.
The Group's risk appetite reflects the fact that effective risk management
requires risk and reward to be suitably balanced. Exposure to health and
safety, financial and compliance risks are mitigated as far as is reasonably
practicable.
The Group is however prepared to take certain strategic, commercial and
operational risks in pursuit of its objectives; where these risks and the
potential benefits have been fully understood and reasonable mitigating
actions have been taken.
KEY RISKS AND UNCERTAINTIES
1. HEALTH, SAFETY AND WELLBEING (HS&W) Gross change: Static Net change: Static
Principal risk and why it is relevant Key mitigation, change and sponsor
We continue to work to ensure the safety of employees exposed to risks such Safety remains our number one priority. We target an accident-free environment
as the operation of heavy machinery, moving parts, noise, dusts and chemicals. and have robust policies in place covering expected levels of performance,
responsibilities, communications, controls, reporting, monitoring and review.
2024 has seen the final year of our Zero Harm strategy which focused on
Visible Felt Leadership, where our senior managers have been trained to
undertake safety observations throughout the business. These proactive
discussions with colleagues are designed so our leaders can understand
the work they perform and be able to praise safe behaviours or provide
assistance in identifying safer ways of completing a task. We continue to
promote our Golden Rules as part of this process and drive our safety
engagement aligned with our new Company values. The next stage of our health
and safety strategy, covering phases 2025-2027 and 2028-2030, is linked to our
manufacturing excellence programme and redefined values. This strategy will
continue to ensure our compliance to core HS&W legislation, whilst
continuing to move the focus towards positive culture and behaviours.
Executive sponsor: Neil Ash
2. SUSTAINABILITY / CLIMATE CHANGE Gross change: Static Net change: Static
Principal risk and why it is relevant Key mitigation, change and sponsor
We recognise the importance of sustainability and climate change and both the We recognise the positive impact that our products have on the built
positive and negative impacts our products and processes have on the environment across their lifespan and are keen for the durability, longevity
environment. and lower lifecycle carbon footprint of our products to be championed and
better understood. Short-term transitional sustainability risks include
increasing regulatory burden or cost, an inability to adapt our business
model to keep pace with new regulation or customer preferences changing more
quickly than anticipated or too quickly for our R&D to keep pace.
Several longer-term physical risks could have a material impact on the
business. These risks include more severe weather impacts, such as flooding,
and potentially changes to the design of buildings in order to adapt
to different climatic conditions.
A comprehensive sustainability report is included within this Annual Report
and is also available as a separate document, providing detailed disclosure
of the sustainability-related risks faced by our business.
Our desire to reduce our impact upon the environment sits hand-in-hand with
maximising the financial performance of our business; by investing
in modernising our production facilities not only do we reduce energy
consumption and our CO2 emissions, but we also benefit financially from
reducing the amount of energy and carbon credits we need to purchase.
Market conditions in recent periods have caused a number of shorter-term
sustainability challenges, with operational inefficiencies resulting from
reduced production requirements. Whilst this has reduced absolute emissions it
has negatively impacted emissions intensity and offset some of the positive
decarbonisation initiatives that have been implemented.
Acknowledging the continued importance of the subject matter, since January
2024, all sustainability risks have been governed by the standalone
Sustainability Committee.
Executive sponsor: Ben Guyatt
3. ECONOMIC CONDITIONS Gross change: Static Net change: Static
Principal risk and why it is relevant Key mitigation, change and sponsor
Demand for our products is closely correlated with residential and commercial Understanding business performance in real-time, through our customer order
construction activity. book, strong relationships across the building sector, and a range of internal
and external leading indicators, help to inform management and ensure that the
Changes in the wider macroeconomic environment can have significant impact in business has time to respond to changing market conditions.
this respect and we monitor these closely as a result.
A cyclical downturn in the UK housing market is ongoing, driven primarily by
Government economic policy and domestic drivers; impacting demand for housing
in the short-term. However, we recognise that ultimately there remains a
shortage of housing in the UK, financing is accessible (though now more
expensive) and the population continues to grow and as such we remain
confident in market recovery and the subsequent medium to long-term outlook.
The trajectory of the recovery however is not only dependent on domestic
factors with global factors including the US as well as wider geopolitical
issues adding uncertainty, something we remain watchful of moving into 2025.
In a weaker demand environment in 2024 we have displayed our ability to
flex output and slow production, ensuring that production is matched to sales
in the period. This has been effective in the past and we believe the changes
made to our operational footprint in recent periods leave us well positioned
to take advantage of attractive market fundamentals in the medium to
long-term.
Executive sponsor: Neil Ash
4. GOVERNMENT ACTION AND POLICY Gross change: Decrease Net change: Decrease
Principal risk and why it is relevant Key mitigation, change and sponsor
Residential development (both new build and repair, maintenance and Government action and policy as laid out above continues to be a key
improvement) contributes the majority of Group revenue. The dependence of determinant of demand for housing. We closely follow the demand we are seeing
Group revenues on this sector means that any change in activity levels in this from our key markets, along with market forecasts, end-user sentiment,
sector will affect profitability and in the longer-term, strategic growth mortgage affordability and credit availability in order to identify and
plans. respond to opportunities and risk. Group strategy focuses upon our strength in
this sector whilst also continuing to strengthen our commercial offer.
The impact of higher interest rates and the wider macroeconomy on this sector
has a notable impact on demand levels in recent years and we remain watchful
entering 2025.
The investment in the redevelopment of the Wilnecote brick factory, which will
supply the commercial and specification market, will provide a degree of
diversification away from residential construction, further insulating the
Group from the impact of future demand cycles.
Executive sponsor: Neil Ash
5. RESIDENTIAL SECTOR ACTIVITY LEVELS Gross change: Static Net change: Static
Principal risk and why it is relevant Key mitigation, change and sponsor
Residential development (both new build and repair, maintenance and Government action and policy as laid out above continues to be a key
improvement) contributes the majority of Group revenue. The dependence of determinant of demand for housing. We closely follow the demand we are seeing
Group revenues on this sector means that any change in activity levels in this from our key markets, along with market forecasts, end-user sentiment,
sector will affect profitability and in the longer-term, strategic growth mortgage affordability and credit availability in order to identify and
plans. respond to opportunities and risk. Group strategy focuses upon our strength in
this sector whilst also continuing to strengthen our commercial offer.
The impact of higher interest rates and the wider macroeconomy on this sector
has a notable impact on demand levels in recent years and we remain watchful
entering 2025.
The investment in the redevelopment of the Wilnecote brick factory, which will
supply the commercial and specification market, will provide a degree of
diversification away from residential construction, further insulating the
Group from the impact of future demand cycles.
Executive sponsor: Neil Ash
6. INVENTORY MANAGEMENT Gross change: Decrease Net change: Decrease
Principal risk and why it is relevant Key mitigation, change and sponsor
Ensuring sufficient inventories of our products is critical to meeting our After a long period of historically low stock levels, a softening in demand in
customers' needs, though this should not be at the expense of excessive cash the last two years has allowed these stocks to be replenished. Strong
tied up in working capital. customer relationships and some degree of product range substitution have
historically mitigated the risk of inventory levels being too low, and now
Whilst the ability to serve our customers is key, where excessive inventory that levels are growing these relationships remain key, ensuring that
starts to be built, management must ensure that production is aligned to visibility of our customers' needs and demand levels can accurately be
forecast demand. Cash tied to surplus working capital increases financing matched to our production levels.
costs and could ultimately impact the Group's liquidity, restricting the
amount of cash available for other purposes. Acknowledging the current weaker demand environment, it is crucial to
effectively manage working capital levels, and in 2024 we have successfully
managed production levels resulting in a fall in inventory, whilst ensuring
sufficient levels are held to support the requirements of our customers
whilst reducing our cost base and ensuring excessive cash is not tied up
in inventory.
Executive sponsor: Adam Smith and Mark Davies
7. CUSTOMER RELATIONSHIPS AND REPUTATION Gross change: Static Net change: Static
Principal risk and why it is relevant Key mitigation, change and sponsor
Significant revenues are generated from sales to a number of key customers. One of our strategic priorities is to be the supply chain partner of choice
Where a customer relationship deteriorates, there is a risk to revenue and for our customers. By delivering excellent customer service, enhancing our
cash flow. brands and offering the right products, we seek to develop our longstanding
relationships with our customers. Regular and frequent review meetings focus
on our effectiveness in this area.
In a softer demand environment, an inability to maintain these relationships
could manifest itself in loss of market share, and if not managed correctly,
be detrimental in the longer-term in periods of stronger demand. To mitigate
these risks we remain in constant communication with our customers, ensuring
they are well informed of the challenges faced by our business. We remain
particularly conscious of potential impacts on our customer service and
selling prices as we aim to retain our margins in a time where our customers
are also facing challenging conditions.
Executive sponsor: Adam Smith
8. ATTRACTING, RETAINING AND DEVELOPING EMPLOYEES Gross change: Static Net change: Static
Principal risk and why it is relevant Key mitigation, change and sponsor
We recognise that our greatest asset is our workforce and a failure to We understand where key person dependencies and skills gaps exist and continue
attract, retain and develop talent will be detrimental to Group performance. to develop succession, talent acquisition and retention plans. We continue to
focus on safe working practices, employee support and strong
communication/employee engagement.
Notwithstanding a softer demand environment, challenges associated with labour
availability remain across the business in key skilled areas and it is crucial
that this continues to be addressed to ensure the ongoing success of the Group
which is dependent on our people.
Executive sponsor: Sarah Renton
9. INNOVATION Gross change: Static Net change: Static
Principal risk and why it is relevant Key mitigation, change and sponsor
Failure to respond to market developments could lead to a fall in demand Strong relationships with customers as well as independently administered
for the products that we manufacture. This in turn could cause revenue and customer surveys ensure that we understand current and future demand. Close
margins to suffer. ties between the Strategy, Operations and Commercial functions ensure that
the Group focuses on the right areas of research and development.
In a period of softer demand for our products, providing innovative products
for both our core markets to 'strengthen the core' and the wider construction
market, 'beyond the core', is of increased importance and we strive to ensure
that we are in a position to do so.
New product development and related initiatives are therefore ongoing and we
continue to commit to further investment in research and development (R&D)
with clear links between investment in R&D and the work undertaken in
relation to sustainability.
Executive sponsor: Nicola Chapman
10. IT INFRASTRUCTURE AND SYSTEMS Gross change: Static Net change: Static
Principal risk and why it is relevant Key mitigation, change and sponsor
Disruption or interruption to IT systems could have a material adverse In our time as a listed entity we have continued to invest in, consolidate and
impact on performance and position. modernise our IT systems, maintaining ISO 27001 Information Security
accreditation. This investment has ensured our ability to maintain the level
of customer service that our customers expect.
We continue to increase our resilience in this area, ensuring that our people
understand their role in any attempt to compromise our cyber security, and
regular training and tests are carried out as such.
Executive sponsor: Ben Guyatt
11. BUSINESS CONTINUITY Gross change: Static Net change: Static
Principal risk and why it is relevant Key mitigation, change and sponsor
Group performance is dependent on key centralised functions operating Plans are in place to allow key centralised functions to continue to operate
continuously and manufacturing functions operating uninterrupted. Should we in the event of business interruption and remote working capabilities have
experience significant disruption, there is a risk that products cannot been maintained and continually strengthened in recent years, ensuring the
be delivered to customers to meet demand and all financial KPIs may suffer. business is able to continue operating with minimal disruption.
Where a scenario without a pre-envisaged plan is faced, our business
continuity policy allows managers to apply clear principles to develop plans
quickly in response to emerging events.
We consider climate-related risks when developing business continuity plans
and have learnt lessons from weather-related events in recent years which
inform these plans. Loss of one of our operating facilities through fire or
other catastrophe would impact upon production and our ability to meet
customer demand. Working with our insurers and risk advisors, we undertake
regular factory risk assessments, addressing recommendations as appropriate.
We accept it is not possible to mitigate all the risks we face in this area
and as such we have a comprehensive package of insurance cover including both
property damage and business interruption policies.
Executive sponsor: Neil Ash and Ben Guyatt
12. PROJECT DELIVERY Gross change: Static Net change: Static
Principal risk and why it is relevant Key mitigation, change and sponsor
We are coming to the end of an extensive programme of capital investment Despite the virtually complete Desford project, our vigilance in managing
within our business which sees a number of large projects add production project delivery across the business has not diminished and the focus of this
capacity. risk has in turn shifted to ongoing projects at both Wilnecote and
Accrington.
Ensuring these projects are delivered and commissioned as intended is
essential to the future success of the business. Management closely monitor all current strategic projects for potential
challenges, cost over-runs and delays, and act promptly to ensure that risks
are mitigated. Recommissioning of the new Wilnecote factory is now expected in
2025, a delay attributable to challenges faced by the Group's suppliers and
connected to wider global economic and supply chain challenges. Despite the
delay, Wilnecote (as with Desford previously) has been procured under a fixed
price supply contract ensuring that the price we paid was certain at the
outset. Given the unusually high levels of inflation and supply chain
challenges in recent years, the Group has benefited significantly from these
contract terms.
Management recognise the additional risks posed by running concurrent major
projects, and to mitigate, separate project management structures are in
place for each respective project and where common suppliers are involved,
procedures are in place to ensure they retain sufficient capacity to deliver
on both projects without significant risk.
Executive sponsor: George Stewart
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