REG - Ibstock PLC - Interim Results
27/07/2022 07:16
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RNS Number : 8409T Ibstock PLC 27 July 2022
Interim results
27 July 2022
Ibstock plc
Interim results for the six months ended 30 June 2022
Strong first half performance gives confidence for the full year;
good further progress with strategic initiatives
Ibstock plc ("Ibstock" or the "Group"), a leading UK manufacturer of clay
bricks and concrete products and solutions, announces its results for the six
months ended 30 June 2022.
Statutory results
Six months ended 30 June 2022 2021 Change %
Revenue £259m £202m +£57m +28%
Profit before taxation £51m £39m +£12m +32%
EPS 10.0p 2.7p +7.3p >100%
Interim dividend per share 3.3p 2.5p +0.8p +32%
Adjusted results(1)
Six months ended 30 June 2022 2021 Change %
Adjusted EBITDA £71m £55m +£16m +29%
Adjusted EPS 11.3p 7.9p +3.4p +43%
Adjusted free cash flow £30m £23m +£7m +29%
Net debt £36m £53m £18m lower 33%
lower
Return on Capital Employed 19.8% 14.2% +560 bps +39%
Financial highlights
● Strong first half performance, despite industry-wide inflation and supply
chain challenges, resulting in robust profit and cash generation, and giving
confidence for the full year
o Robust demand in new build residential, RMI and infrastructure markets
o Continued strong operational performance, with consistent network reliability
and tight focus on cost management
● Revenue increased by 28% to £259 million (2021: £202 million), with strong
volume growth supported from inventories, alongside material pricing benefit
● Adjusted EBITDA(1) up 29% to £71 million (2021: £55 million), with growth
driven principally by clay performance, reflecting a mid-single digit volume
increase and good margin management
● Adjusted EBITDA(1) margins of 27.3% were 20bps ahead of the prior year (2021:
27.1%) despite significant variable cost inflation and after £1.5 million of
operational investment in Ibstock Futures and £4 million one-off cost of
living charge
● Statutory profit before tax of £51 million (2021: £39 million) reflects
strong first half trading performance
● Return on Capital Employed (ROCE)(1) increased by 560bps to 19.8% (2021:
14.2%), approaching Group's medium-term target of 20%
● Interim dividend increased by 32% to 3.3p per share (2021: 2.5p), reflecting
the strong performance and the Board's confidence in the Group's prospects
Strong momentum into H2 2022
● Trading in the early weeks of the second half remains encouraging, with
resilient demand across end markets
● Backed by strong forward order visibility, we expect good year on year
progress in H2, despite capacity slightly below H1 due to phasing of planned
shutdowns and some inventory rebuild
● Expect to maintain tight control of costs, and retain our dynamic pricing
strategy against a backdrop of ongoing cost inflation
● Energy price risk well mitigated with over 90% of energy requirements for H2
2022 now secured and approaching 50% secured for 2023
● While mindful of broader macroeconomic uncertainties, the Board now expects to
deliver adjusted EBITDA(1) for 2022 modestly ahead of the expectations
signalled at the time of the AGM statement in April
Increasing confidence in the Group's longer term potential
● Strong trading in H1 2022 demonstrates organic growth momentum towards the
Group's stated targets of revenues >£600m and adjusted EBITDA(1) margin of
at least 28% by 2026
● UK construction markets remain solidly underpinned over the medium-term, with
a structural housing deficit, healthy mortgage availability and supportive
government policy
● Strategic growth initiatives progressing well:
o Capital enhancement projects in clay business now complete - network capacity
increased by 5% in line with expectations
o Atlas and Aldridge investment on track and now expected to deliver annualised
EBITDA(1) of £18 million (50% above previous expectations) on capital cost of
up to £75 million, representing improvement vs original ROCE(1) target
o Continued focus on ESG agenda with set of interim targets and factory-level
plans being established to drive progress against our new strategic goals
● Ibstock Futures continues to invest in leadership, innovation and commercial
capability and is progressing organic and inorganic initiatives to accelerate
the Group's entry into fast growth construction product, solution and
technology markets; further bolt-on acquisitions under review
● Balance sheet remains strong, with leverage below the bottom end of the target
range, after £11 million of growth investments during H1 2022 and £6 million
spent on buying back shares
Joe Hudson, Chief Executive Officer, commented:
"I am very pleased with the Group's first half performance, delivering profit
and cash both significantly ahead of the prior period, supported by sustained
robust demand across all our end markets and good operational execution.
"We continue to manage inflation and supply chain pressures well and are
making good progress with our strategic development plans, with investments in
new capacity progressing well, and good momentum in Ibstock Futures, as we
focus on the delivery of our ambitious medium term financial targets.
"Our market backdrop remains encouraging in the early weeks of the second half
- demand is firm, asset utilisation is high and industry inventories remain
low - and the strong first half performance gives us confidence in the full
year outcome. We have a clear strategy based on both core and diversified
growth and will continue to apply our dynamic and disciplined approach to
capital allocation.
"While we remain mindful of the broader macroeconomic uncertainties, the Board
now expects to deliver adjusted EBITDA(1) for the full year modestly ahead of
the expectations signalled in April."
(1) Alternative Performance Measures are described in Note 3 to the results
announcement
Results presentation
Ibstock is holding a presentation at 10.30 today at 54 Hatton Garden, London,
EC1N 8HN.
Please contact ibstock@citigatedewerogerson.com
(mailto:ibstock@citigatedewerogerson.com) to register your in-person
attendance.
A live webcast of the presentation will be available.
Please register here
(https://stream.brrmedia.co.uk/broadcast/62b9956471203e42c1fbf204) for the
live webcast of the presentation.
The presentation can also be heard via a conference call, where there will be
the opportunity to ask questions.
Conference Call Dial-In Details: UK: +44 (0)330 165 4012
US: +1 323-701-0160
Confirmation code: 7335679
An archived version of today's webcast analyst presentation will be available
on http://www.ibstockplc.com (http://www.ibstockplc.com) later today.
Ibstock plc 01530 261 999
Joe Hudson, CEO
Chris McLeish, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith
Holly Gillis
About Ibstock plc
Ibstock plc is a leading UK manufacturer of clay bricks and a diversified
range of clay and concrete products and solutions. Its principal products are
clay bricks, brick components, concrete roof tiles, concrete alternatives for
stone masonry, concrete fencing and pre‐stressed concrete products.
The Group's two divisions are:
Ibstock Clay: The leading manufacturer by volume of clay bricks sold in the
United Kingdom. With 16 manufacturing sites Ibstock Brick has the largest
brick production capacity in the United Kingdom. It operates a network of 18
active quarries located close to its manufacturing plants. Ibstock Kevington
provides masonry and pre-fabricated component building solutions, operating
from 6 sites across the United Kingdom.
Ibstock Concrete: A leading manufacturer of concrete roofing, walling,
flooring and fencing products, along with lintels and general concrete
building products, with 14 manufacturing plants in the United Kingdom.
Forward-looking statements
This announcement contains "forward-looking statements". These forward-looking
statements include all matters that are not historical facts and include
statements regarding the intentions, beliefs or current expectations of the
directors. By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances that are
difficult to predict and outside of the Group's ability to control.
Forward-looking statements are not guarantees of future performance and the
actual results of the Group's operations. Forward-looking statements speak
only as of the date of such statements and, except as required by applicable
law, the Group undertakes no obligation to update or revise publicly any
forward-looking statements.
Chief Executive's Review
Introduction
I am very pleased to report a strong performance for the first half of the
year, with both profit and cash significantly ahead of the prior period.
Trading was robust, supported by strong demand across our new build
residential, Repairs, Maintenance and Improvement (RMI), and infrastructure
markets, alongside solid operational execution. While industry supply chains
remained challenging and inflationary pressures intensified during the period,
the business has continued to manage these challenges well.
Looking forward, our markets remain solidly underpinned over the medium-term,
with a structural housing deficit, healthy mortgage availability and
supportive government policy. Industry brick inventories remain at
historically low levels, with the market having to rely on imported bricks due
to the constraints on UK capacity. Overall, having made a strong start to
2022, the robust operational backdrop provides confidence in achieving our
ambitious medium term targets.
The Group also made good further progress across all three of its strategic
pillars: Sustain; Innovate; and Grow.
Across the Group, commercial performance was strong, with both volume and
price contributing to significant year on year revenue growth. Consistent
reliability and efficiency was achieved across the plant network, with output
in line with expectations, despite experiencing some supply chain challenges,
particularly in the early part of the period. We saw significant variable cost
inflation, particularly in energy, materials and freight, and have been
successful in recovering this fully through increases in selling price.
Our investment in the redevelopment of our wire-cut clay brick facilities in
the West Midlands remains on track, with commissioning expected from the end
of 2023. When complete, the new state-of-the-art factory at our Atlas site
will manufacture the UK's first net-zero carbon bricks. We are now well
progressed with the tendering and procurement programme for the project and
have continued to develop our operational plans for the factories. We now
expect the project to deliver significantly higher annualised adjusted
EBITDA(1) of £18 million from 2025 (compared to £12 million initially) with
a capital cost of up to £75 million (compared to £60 million initially),
representing an improved ROCE(1) compared to the original project target.
Ibstock Futures continued to build momentum as we invested in the strength and
capability of the core team, whilst making good progress in developing the
pipeline of both organic and inorganic growth initiatives. We completed a
small asset acquisition in January 2022 providing a strong position within
glass reinforced concrete (GRC) panel technology, supplied into a wide range
of façade applications. We also continued to make progress towards the
development of our new brick slip systems factory in Nostell, Yorkshire.
Futures remains focused on accelerating the Group's entry into a number of
fast-growth product, solution and technology markets created by the evolution
of the construction sector.
Our commitment to environmental sustainability and social progress represents
a strong unifying cause for everyone at Ibstock. We maintained focus on all
areas of our ESG agenda during the first half, with the new strategic
framework and targets announced in late 2021 providing a pathway to reduce
carbon emissions by 40 per cent by 2030, against a 2019 baseline, and be net
zero carbon by 2040. A central pillar of our social agenda is our commitment
to develop and support our people, and to maintain a strong workforce with the
capability to deliver our strategic objectives for the long term. In response
to the challenges our colleagues are facing with the sharply elevated costs of
living, we have committed to make a one-off payment to those employees most
heavily impacted during the second half of the 2022 year, representing a total
cost of around £4 million recognised during the first half.
In line with our dynamic capital allocation framework, we initiated a £30
million share buyback during the first half of 2022, purchasing around three
and a half million shares by 30 June 2022. In light of our strong performance,
and the Board's confidence in the Group's position and prospects, we have
increased the interim dividend by 32% to 3.3p per share (2021: 2.5p).
As we set out in March 2022, our strong financial position, which is supported
by significant ongoing cash generation, provides us with a platform to deliver
attractive growth and shareholder returns into the future.
Financial Performance
The results for the first half year demonstrate a marked improvement on the
same period in the prior year, with all of our key financial metrics showing
significant progress. Sales of £259 million were 28% up on 2021 (£202
million) and materially ahead of the pre-COVID performance reported in 2019,
as the Group benefitted from a combination of robust demand and strong
commercial execution. Industry-wide supply chain challenges were well managed
and we continued to mitigate the impact of inflationary pressures on our cost
base through a dynamic commercial approach in both divisions. Adjusted
EBITDA(1) grew 29% to £71 million (2021: £55 million), primarily as a result
of the strong performance in the Clay division.
Adjusted EBITDA(1) margins of 27.3% were ahead of the prior year (2021:
27.1%), reflecting good cost management and the benefits of our dynamic
pricing approach. Statutory earnings per share rose by 7.3 pence to 10.0 pence
(2021: 2.7 pence).
Our balance sheet remains strong, with net debt reduced to £36 million (June
2021: £53 million; December 2021: £39 million). Reflecting good progress
against our strategic objectives, we invested £11 million in growth
initiatives in the period, and expect capital expenditure to accelerate during
the second half, bringing full year growth capital expenditure closer to our
original expectation of around £50 million.
Leverage at 30 June 2022 was below the bottom end of our target range,
reflecting the robust trading performance and good working capital management,
with net debt to adjusted EBITDA(1) of 0.3 times (30 June 2021: 0.6 times).
Return on Capital Employed(1) (ROCE) increased by 560 bps to 19.8% (2021:
14.2%), approaching our medium-term target of at least 20%.
Divisional Review
Ibstock Clay
Core business
Our core Clay business had a strong first half, with very good execution
against a backdrop of continued robust demand. Consistent reliability and
efficiency across the plant network meant that we achieved the anticipated
increase in network output in line with our expectations, with fixed costs
well controlled in the context of the inflationary backdrop. Sales volumes
increased by mid-single digits compared to the comparative period, reflecting
strong factory output and some draw down on inventories during the period. The
division continued to benefit from the actions taken to reduce its fixed cost
base in the second half of 2020.
Supply chain conditions remained challenging, although the business continued
to mitigate these issues effectively with limited impact on operational
performance. Significant inflation across the key variable cost areas of
energy, freight, carbon and materials was recovered by selling price
increases, with in-year energy price inflation addressed through a dynamic
quarterly pricing approach.
Divisional revenue grew by 34% to £186 million in the first half (2021: £138
million), with volume growth in every major channel. Adjusted EBITDA(1)
totalled £64 million in 2022, (2021: £47 million), reflecting strong sales
volumes, firm pricing and good cost management.
Adjusted EBITDA margins in Clay were 34.7%, ahead of the comparative period
(H1 2021: 34.1%). The current period included a charge of around £2.5 million
relating a one-off cost of living payment.
Ibstock Futures
In November 2021 the Group announced the formation of Ibstock Futures
("Futures"), a business unit established to capture opportunities in new, fast
growth sectors of the construction market.
The development of Futures is progressing well under the leadership of its
Managing Director, Jeremie Rombaut, and the business is continuing to build
strength and capability in its team. In early 2022, Futures acquired the
assets of Telling GRC, a small specialist in glass reinforced concrete (GRC)
panel technology. The integration of this business into the Group is
progressing well and first half performance was in line with our expectations.
We remain focused on accelerating the Group's penetration into a number of
fast-growth product, solution and technology markets created by the evolution
of the construction sector, and continue to progress a number of attractive
organic and inorganic growth projects. Having completed the Telling GRC asset
acquisition, Futures' pipeline of M&A opportunities has continued to
build, with a range of potential targets under review that have the ability to
accelerate the business' development and entry into attractive niche market
segments. Our project to use existing clay reserves to produce a cementitious
replacement continue to progress well, and we expect to move from the research
to development phase during the second half of the 2022 year.
Demand in the brick slips market continues to build, underpinning the
opportunity for Futures in what will be a key product category for the
business as it develops its strong pipeline of commercial opportunities. In
light of the encouraging near term demand outlook, we are actively exploring
ways to accelerate our network capacity build for brick slips ahead of the
Nostell factory coming on stream.
We continue to expect operational investment of around £4 million in 2022
within Ibstock Futures, with around £1.5 million incurred in the first half
as the business invested in research and development, and in building in-house
innovation and commercial capability.
Ibstock Concrete
Concrete delivered a solid performance in the first half as it continued to
benefit from its exposure to a broad range of residential and infrastructure
markets, and resilient demand for its products.
Divisional revenue in the period grew by 16% to £74 million (2021: £64
million), driven by a material pricing benefit. Overall, sales volumes were in
line with the comparative period, as growth within fencing, walling and rail
infrastructure was offset by lower volumes of roof tiles, as operational
challenges held back output at our roof tile factory in Leighton Buzzard.
Adjusted EBITDA(1) totalled £11 million in 2022, (2021: £12 million), with
adjusted EBITDA(1) margins of 15.3% below the comparative period (H1 2021:
18.5%). This reduction reflected incremental costs of around £1 million in
our roofing factory and the divisional impact of the one-off cost of living
payment totalling around £1.5 million. We expect the concrete adjusted
EBITDA(1) margin percentage to move towards our medium-term ambition for the
division during the second half.
Strategic Update
During 2021 the Group set out a clear path for significant growth and value
creation over the medium term, with the generation of substantial further
capital to support both incremental investment and additional shareholder
returns.
Set against this ambition, at the beginning of 2022 we announced a set of
medium-term financial targets:
● Grow Group revenues to in excess of £600 million by 2026
● Medium term profitability targets:
■ Adjusted EBITDA(1) Margins in Clay business of >35%
■ Overall Group margins of at least 28%
● Revenues outside of traditional clay brick to represent >40% of the Group
(from c.30% in 2021)
● Retaining our capital discipline with ROCE(1) of >20% into the medium term
We expect the construction market to continue to evolve, adopting more
sustainable and industrialised processes, practices and products. We are
focused on ensuring that we maximise our opportunities in this developing
market, which we believe will drive longer term growth and strong financial
performance for the Group.
Our operational strategy is defined across three pillars: Sustain, Innovate
and Grow. These are detailed further below.
Sustain
As a scale industrial business, sustainable high performance is at the heart
of what we do. We are focused on three priorities: health and safety;
operational excellence; and environmental performance.
Health and safety: The health, safety and wellbeing of our employees is always
our first priority and our six safety rules guide our actions and behaviours
across the enterprise.
In the period, we delivered further improvements in all areas of our health
and safety roadmap, with particular emphasis on safety procedures for
contractors, and the embedding of enhanced safety practices into our quarry
locations. The Group is on track to meet its 2023 target of a 50% reduction in
Lost Time Injury Frequency Rate ("LTIFR") with a further reduction achieved in
the first half.
Whilst continuing to prioritise physical health and safety at all locations,
we are also increasing our focus on the promotion of mental health and
wellbeing across our organisation, with a number of important developments
during the first half of the year. We rolled out a comprehensive programme of
workshops to upskill all managers, ran our first enterprise campaign to
coincide with Mental Health Awareness Week in May 2022, and established a
network of Health & Wellbeing working groups across the business.
Overall, we remain committed to driving our business to zero harm for
everyone.
Operational excellence
The Group's operational performance was robust during the first half of 2022
as we benefitted from the full commissioning of our capital enhancement
projects at the SM2, Laybrook and Ellistown factories. These projects, which
are now completed, have added 5% to the clay network capacity. We also
continued to enhance our preventative maintenance programme across all sites,
which is central to ensuring the efficient, long run performance of our
networks.
Environmental performance
Having announced our 2030 ESG Strategy during the first half, momentum has
gathered pace across the Group. Across our businesses, at an individual site
level, our teams have been working to establish actionable plans which will
deliver our targeted 40% carbon reduction by 2030 against the 2019 baseline.
While carbon reduction is the most material positive environmental impact
Ibstock can make, we remain committed to reducing the impacts of our
operations on the environment, more generally and we were pleased to deliver a
substantive reduction in plastic usage during the period, now down by greater
than 30% compared with 2019.
Innovate
Innovation is at the heart of our growth plans, and we are committed to the
continuing enhancement of our product portfolio and customer proposition to
strengthen our market-leading positions. Our initiatives are centred on three
specific areas: product innovation; customer experience; and digital
transformation.
Product innovation
As market leader in clay and concrete products, we have the broadest range of
products and systems available in the UK, and we continue to invest to enhance
our proposition. A number of new products were launched during the period
including: Fire Rated Lintels within our Concrete division, which offer
superior safety qualities; and our new Rāmian Range within the Clay division,
which has been designed to meet the growing demand for heritage and reclaimed
style soft mud bricks with natural colours and textures.
In support of our carbon reduction ambitions, product innovations during the
period at two key brick factories have enabled us to reduce raw material
consumption without affecting product technical or aesthetic performance.
These innovations, focused on perforation size and configuration, which have
reduced over 1,000 tonnes of carbon, will be rolled out across other parts of
our network in the months ahead.
Customer experience
We continue to find ways to enhance the experience of our customers at every
stage of their engagement with us. Against a backdrop of global supply chain
challenges, we have taken steps to strengthen our nationwide distribution
capability through the addition of new haulage partners to our distribution
fleet. In addition to improving the service for our customers, this
diversification has reduced execution risk across our business.
Alongside this change, we have significantly upgraded our order management and
delivery scheduling processes, to drive down order cancellation rates, whilst
providing greater certainty for customers.
Digital transformation
The digitalisation of our business will be a key strategic enabler over the
coming years as we look to drive an increasing proportion of our sales
activity through digital channels. The digital sales platform trialled last
year in parts of our Concrete division is being scaled up across many other
product categories across the whole business later this year, driving greater
automation of order management and order fulfilment for our customers.
Grow
The Group's growth strategy is based on a combination of continued development
of its core business and effective diversification into attractive new
segments of the construction market. The strategy is being supported by
targeted investment projects and acquisitions which create value and
accelerate delivery.
Investment in the core
Within the Clay business, our enhancement projects are now complete, ensuring
that clay network capacity increased by 5%, in line with our expectations. The
Atlas and Aldridge redevelopments are on track to be commissioned from the end
of 2023, which will collectively increase capacity by around 115 million
bricks. The commissioning of the Atlas facility will mark a key milestone for
Ibstock and the industry, as the UK's first net-zero brick factory.
Diversified growth
The formation of Ibstock Futures provides a focus for our strategic
aspirations to grow through the introduction of products, solutions and
technology, designed to support, and benefit from, the megatrends of
sustainability and the industrialisation of construction methods. With a
strong team in place, and a clear pipeline of attractive growth opportunities,
we are well placed to take a leadership position in fast growing sectors of
the construction market.
People
Our people will always be our most important asset, and as an organisation, we
are seeking to create a culture driven by performance and led by our values.
Developing our people is of vital importance, and during the period we
introduced an enterprise learning hub through which all our people across the
business can access training spanning a wide range of content.
We are passionate about fostering an inclusive culture through which our
people feel trusted, valued and empowered. We are also committed to promoting
diversity, in all its forms, and have, in recent months, introduced a
diversity charter and upskilled our leaders across the business through the
provision of diversity training.
Summary and outlook
The business performed strongly in the first half despite industry-wide supply
chain and inflationary challenges, delivering a significantly improved
year-on-year result. This performance was underpinned by solid operational
execution, and a clear focus on the strategic priorities necessary to achieve
our ambitious medium term financial targets.
Looking ahead, industry fundamentals remain robust, with strong near-term
demand, high levels of asset utilisation and low product inventories. We
have a clear strategy based on both core and diversified growth initiatives,
underpinned by our strong financial position and dynamic approach to capital
allocation.
Trading in the early weeks of the second half has remained encouraging, and
this positive momentum provides us with a strong platform to deliver
significant further financial and strategic progress. Given this momentum and
our strong forward order visibility, we expect good year on year progress in
H2, despite capacity being slightly lower than in H1 due to the seasonal
weighting of planned factory shutdowns to the second half as well as the plan
to build back inventory levels.
Whilst we remain mindful of the broader macroeconomic uncertainties, the Board
now expects adjusted EBITDA(1) for 2022 to be modestly ahead of the previous
expectations signalled at the time of the AGM trading statement in April.
( )
(1) Alternative Performance Measures are described in Note 3 to the results
announcement
Chief Financial Officer's report
Introduction
The Group delivered a strong trading performance in the first six months of
2022, reflecting both robust market demand and solid operational performance.
The dynamic commercial approach taken in both the Clay and Concrete divisions
was successful in recovering significant cost inflation. A continued intense
focus on cost management ensured that Group adjusted EBITDA(1) margin
percentage was ahead of the prior year on a materially higher top line, and
after around £1.5 million of incremental operational investment in Ibstock
Futures.
The Group also delivered an excellent cash flow performance, reflecting strong
trading and disciplined capital management. This performance was instrumental
in strengthening further the Group's balance sheet, with closing net debt(1)
of £36 million at 30 June 2022 representing leverage(1) of 0.3 times (2021:
0.6 times).
As part of our dynamic and disciplined capital allocation strategy, as well as
completing a small bolt-on asset acquisition in the period, we initiated a
share buy-back which is expected to return £30 million to shareholders during
the 2022 year. With our strong financial position, and inherently cash
generative business, we expect to have significant further cash available to
support growth investment and shareholder returns over the medium-term.
Climate Change & TCFD
We have an ambition to be the most sustainable manufacturer of clay and
concrete products in the UK, and to lead our sector in the disclosure and
transparency around Environmental, Social and Governance (ESG) issues. We have
invested significant capital over the last decade, with investment projects
across the Group's plant network contributing to a reduction in the carbon
intensity of our manufacturing processes. Our new strategic framework and
targets announced in late 2021 provide a pathway to reduce carbon emissions by
40 per cent by 2030, against a 2019 baseline, and be net zero carbon by 2040.
We continue to actively monitor the transitional and physical risks of climate
change through our risk management process.
Alternative performance measures
This results statement contains alternative performance measures ("APMs") to
aid comparability and further understanding of the financial performance of
the Group between periods. A description of each APM is included in Note 3 to
the financial statements. The APMs represent measures used by management and
the Board to monitor performance against budget, and certain APMs are used in
the remuneration of management and Executive Directors. It is not believed
that APMs are a substitute for, or superior to, statutory measures.
Group results
The table below sets out segmental revenue and adjusted EBITDA(1) for the year
Clay Concrete Central costs Total
£'m £'m £'m £'m
Six-month period ended 30 June 2022
Total revenue 185.5 73.8 - 259.3
Adjusted EBITDA(1) 64.4 11.3 (5.0) 70.7
Margin 34.7% 15.3% 27.3%
Six-month period ended 30 June 2021
Total revenue 138.3 63.8 - 202.0
Adjusted EBITDA(1) 47.2 11.8 (4.2) 54.8
Margin 34.1% 18.5% 27.1%
(1) Alternative Performance Measures are described in Note 3 to the results
announcement
Due to rounding, numbers presented may not add up precisely to the totals
provided and percentages may not precisely reflect the absolute figures
The activities of the new Ibstock Futures business unit have been reported
within the Clay segment since this is the basis upon which performance is
reported to the Chief Operating Decision Maker.
Revenue
Group revenue for the six months ended 30 June 2022 totalled £259.3 million
(2021: £202.0 million), an increase of 28%. Performance reflected a robust
trading environment, with strong demand across our new build residential, RMI
and infrastructure markets, coupled with good commercial execution.
Within Clay, revenues of £185.5 million represented an increase of 34% on
2021 revenues of £138.3 million. Volumes increased by mid-single digits,
modestly ahead of our expectations, supported by a small reduction in
inventories. Material cost inflation was recovered through proportionate price
increases, with in-year energy cost increases addressed through a dynamic
quarterly pricing approach. The new Telling GRC business contributed revenue
of around £2 million, and a breakeven adjusted EBITDA(1) result, during the
first half.
Within Concrete, revenues of £73.8 million were 16% above the comparative
period (2021: £63.8 million), as volume growth in the product categories of
fencing, walling and rail infrastructure was largely offset by lower volumes
of roof tiles. Overall, sales volumes were broadly in line with the
comparative period, with a material price benefit largely mitigating
double-digit year-on-year cost inflation.
Adjusted EBITDA(1)
Management measures the Group's operating performance using adjusted
EBITDA(1). Adjusted EBITDA(1) increased materially year on year to £70.7
million in 2022 (2021: £54.8 million).
Within the Clay division, adjusted EBITDA(1) totalled £64.4 million (2021:
£47.2 million), representing an EBITDA(1) margin of 34.7% (2021: 34.1%). The
adjusted EBITDA(1) increase over 2021 reflected a combination of significant
volume and pricing benefits, combined with solid operational performance and
disciplined cost management. The adjusted EBITDA(1) margin percentage grew by
around 60 basis points, despite the impact of around £1.5 million of
incremental operational investment within Ibstock Futures, and a charge of
around £2.5 million relating to a one-off cost of living payment.
Adjusted EBITDA(1) in Concrete decreased to £11.3 million (2021: £11.8
million), with operational challenges affecting reliability and throughput at
our roofing factory in Leighton Buzzard. Adjusted EBITDA(1) margins of 15.3%
were below 2021 margins of 18.5%, reflecting slightly higher costs in roofing
and the impact of the cost of living payment.
Central costs increased to £5.0 million (2021: £4.2 million), reflecting
higher variable remuneration costs.
Exceptional items(1)
Based on the application of our accounting policy for exceptional items(1),
certain expense items have been excluded in arriving at adjusted EBITDA(1) to
aid shareholders' understanding of the Group's underlying financial
performance.
The amounts classified as exceptional(1) in the period totalled a net cost of
£0.8 million (2021: gain of £5.4 million), comprising the final costs
associated with the Group's closure of sites as part of its single
co-ordinated restructuring plan. Further details of exceptional items(1) are
set out in Note 5 of the financial statements.
Finance costs
Statutory net finance income of £0.1 million in the period compared to a cost
of £2.0 million in the comparative period, reflecting reduced financing
charges coupled with an interest credit arising on the increased discounting
of provisions.
Profit before taxation
Group statutory profit before taxation for the period was £51.2 million
(2021: £38.8 million), reflecting stronger trading.
Taxation
The Group recorded a taxation charge of £10.4 million (2021: £27.9 million)
on Group pre-tax profits of £51.2 million (2021: £38.8 million), resulting
in an effective tax rate (ETR) of 20.3% (2021: 71.7%) compared with the
standard rate of UK corporation tax of 19%. The 2021 statutory tax charge and
ETR reflected the restatement of the Group's net deferred tax liabilities
following the rate change announced in the 2021 Budget that will see the
standard rate of UK corporation tax increase from 19% to 25% from 1 April
2023.
The adjusted ETR(1) (excluding the impact of the deferred tax rate change) was
17.4% (2021: 17.6%), which included the permanent benefit of the UK tax
super-deduction on qualifying capital expenditure also announced in the 2021
budget.
Earnings per share
Group statutory basic earnings per share (EPS) increased significantly to 10.0
pence in the six months to 30 June 2022 (2021: 2.7 pence) principally because
of the Group's increased profit before taxation and the materially lower
statutory tax charge.
Group adjusted basic EPS(1) of 11.3 pence per share also increased
significantly from 7.9 pence in the comparative period, reflecting the
increased adjusted EBITDA(1) achieved in the year. In line with prior years,
our adjusted EPS(1) metric removes the impact of exceptional items(1), the
fair value uplifts resulting from our acquisition accounting and non-cash
interest impacts, net of the related taxation charges/credits. Adjusted EPS(1)
has been included to provide a clearer guide as to the underlying earnings
performance of the Group. A full reconciliation of our adjusted EPS(1) measure
is included in Note 7.
Table 1: Earnings per share
2022 2021
pence pence
Statutory basic EPS - Continuing operations 10.0 2.7
Adjusted basic EPS(1) - Continuing operations 11.3 7.9
Cash flow and net debt(1)
Adjusted free cash flow(1) increased by £6.8 million in the year to £30.2
million (2021: £23.4 million) primarily reflecting the increase in adjusted
EBITDA(1) compared to 2021, partly offset by increased capital spend on our
growth investments, with the cash conversion cycle also continuing to benefit
from the Group's strong focus on working capital management.
Tax payments in 2022 totalled £0.8 million (2021: £4.0 million), benefiting
from the UK tax super-deduction claimed on qualifying capital expenditure.
Other cash outflows of £8.0 million (2021: £4.6 million) included amounts
totalling £4 million in respect of carbon emission credits purchased during
the period (2021: £nil).
The Cash conversion(1) percentage increased to 69% (from 61% in 2021).
Table 2: Cash flow (non-statutory)
2022 2021 Change
£'m £'m £'m
Adjusted EBITDA(1) 70.7 54.8 16.0
Adjusted change in working capital(1) (10.5) (9.9) (0.6)
Net interest (1.6) (1.9) 0.3
Tax (0.8) (4.0) 3.2
Post-employment benefits (0.9) (0.9) -
Other(2) (8.0) (4.6) (3.4)
Adjusted operating cash flow(1) 49.0 33.5 15.5
Cash conversion(1) 69% 61% +8ppts
Total capex (18.8) (10.1) (8.7)
Adjusted free cash flow(1) 30.2 23.4 6.8
(1) Alternative Performance Measures are described in Note 3 to the
consolidated financial statements.
(2) Other includes operating lease payments in both years and emission
allowances purchases in 2022
The table above excludes cash flows relating to exceptional items(1) in both
years.
The increase in working capital(1) of £10.5 million in the first half
reflected both the uplift in selling prices and inflation in unit costs, which
increased the value of trade receivables and inventory respectively during the
period.
Capital expenditure of £18.8 million in the period (2021: £10.1 million)
comprised: sustaining spend of around £8 million; spend on the organic growth
investments of around £10 million; and £1 million in respect of a small
asset acquisition in Ibstock Futures. We expect capital expenditure to
accelerate during the second half, bringing full year growth investments
closer to our original expectation of around £50 million.
Net debt(1) (borrowings less cash) of £35.7 million at 30 June 2022 compared
to £53.5 million at 30 June 2021 and £38.9 million at 31 December 2021,
reflecting the continued benefit of strong operating cash flows throughout the
first half.
Following the refinancing of our debt facilities in the final quarter of 2021,
the Group has £100 million of private placement notes with maturities of
between seven and twelve years at a total fixed coupon of just over 2% and a
£125 million RCF with a group of five banks with an initial four year tenor
(and a one year extension option). The RCF remained undrawn at 30 June 2022.
This funding structure continues to provide efficient long-term financing at
attractive rates of interest.
Return on capital employed(1)
Return on capital employed(1) (ROCE) in 2022 increased materially to 19.8%
(2021: 14.2%). The substantial improvement compared to the prior year
reflected both a significant increase in adjusted operating profit, as well as
a modest reduction in the capital base, as both working and fixed capital were
well managed.
Capital allocation
The Group's capital allocation framework remains consistent with that laid out
in 2020, with the Group remaining committed to allocating capital in a dynamic
and disciplined way.
Our capital allocation framework is set out below:
● Firstly, we will invest to maintain and enhance our existing asset base and
operations;
● Having done this, we will look to pay an ordinary dividend, setting targeted
cover of approximately 2 times underlying earnings;
● Thereafter, we will deploy capital for growth, both inorganically and
organically, in accordance with our strategic and financial investment
criteria;
● And, finally, we will return surplus capital to shareholders.
Our framework remains underpinned by our commitment to maintaining a strong
balance sheet, and we will look to maintain leverage at between 0.5 and 1.5
times net debt(1) to adjusted EBITDA(1) excluding the impact of IFRS 16,
through the cycle.
As part of our disciplined approach to capital allocation, during the first
half we announced a share buyback programme of up to £30 million. As at 30
June 2022, we had purchased 3.5 million shares for cash of around £6 million,
representing around 20% of the programme.
We expect to deploy significant growth capital in the business during the
balance of year and beyond, with a growing pipeline of both organic and
inorganic opportunities. The Board continues to expect capital to be
generated in excess of that required for its investment requirements and
remains committed to returning surplus capital to shareholders as part of its
dynamic and disciplined capital allocation strategy.
Dividend
In light of the Group's financial position and prospects, an interim dividend
of 3.3 pence per ordinary share (2021: 2.5 pence) will be paid on 13 September
2022 to shareholders on the register on 19 August 2022.
Pensions
At 30 June 2022, the defined benefit pension scheme ("the scheme") was in an
actuarial accounting surplus position of £56.2 million (31 December 2021:
surplus of £57.8 million; 30 June 2021: surplus of £42.5 million). At 30
June 2022, the scheme had asset levels of £475.1 million (31 December 2021:
£618.0 million; 30 June 2021: £601.9 million) against scheme liabilities of
£418.9 million (31 December 2021: £560.3 million; 30 June 2021: £559.4
million).
The slight reduction in balance sheet surplus over the period was primarily
due to an increase in near-term levels of inflation, substantially offset by a
reduction in the scheme liabilities arising from a higher discount rate, as
detailed in Note 11.
A contribution level of £1.75 million per annum continues to apply, expected
to increase to £2.0 million from 1 December 2023 and then to £2.25 million
from 1 December 2024.
The Group continues its work with the scheme Trustees to explore steps to
further de-risk the pension scheme, and to pursue its investment strategy of
matching asset categories with the associated liabilities.
Related party transactions
Related party transactions are disclosed in Note 13 to the consolidated
financial statements. During the current and prior year, there have been no
material related party transactions.
Subsequent events
Other than the interim dividend declared by the Directors there have been no
events since the balance sheet date requiring disclosure or adjustment to
these financial statements.
Going concern
The Directors are required to assess whether it is reasonable to adopt the
going concern basis in preparing the financial statements.
In arriving at their conclusion, the Directors have given due consideration to
whether the funding and liquidity resources are sufficient to accommodate the
principal risks and uncertainties faced by the Group.
Having considered the outputs from this work, the Directors have concluded
that it is reasonable to adopt a going concern basis in preparing the
financial statements. This is based on an expectation that the Company and the
Group will have adequate resources to continue in operational existence for at
least twelve months from the date of signing these accounts.
Further information is provided in note 2 of the financial statements.
Principal Risks and Uncertainties
This section should be read in conjunction with the rest of this Half Year
Statement as this provides further information concerning those important
events that have occurred during the first six months of the financial year.
The Group's activities expose it to a variety of risks including climate
change, material operational disruption, market uncertainty, anticipating
product demand, financial risk management, regulatory and compliance,
maintaining customer relationships and market reputation, people and talent
management, product quality, cyber and information security, and major project
delivery. The Board assesses and monitors the key risks impacting the business
and an explanation of the Group's approach to risk management is set out in
Ibstock plc's Annual Report 2021, a copy of which is available on the Group's
corporate website, www.ibstockplc.co.uk .
Having completed the review of principal risks for the Half Year 2022, the
Board has concluded that despite industry-wide inflation, supply chain
challenges and broader macro-economic conditions, due to the Group's dynamic
price management strategy and mitigation of energy price risk, the Group's
existing principal risks and uncertainties remain unchanged from those set out
in its 2021 Annual Report.
A full report on the Group's principal risks will be included with the FY 2022
annual report and accounts. The Board will continue to monitor the Group's
principal risks during the remaining six months of the year, with a focus on
financial risk management and major project delivery.
Statement of directors' responsibilities in relation to the half-yearly
financial report
We confirm that to the best of our knowledge:
● The condensed set of financial statements has been prepared in accordance with
IAS 34 Interim Financial reporting as contained in UK-adopted IFRS;
● The interim management report includes a fair review of the information
required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the
financial year; and a description of the principal risks and uncertainties for
the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
By order of the Board:
Joe Hudson Chris McLeish
Chief Executive Officer Chief Financial Officer
26 July 2022 26 July 2022
Condensed consolidated income statement
for the six months ended 30 June 2022
Unaudited Unaudited Audited
Notes Half year ended 30/06/2022 Half year ended 30/06/2021 Year ended 31/12/2021
£'000 £'000 £'000
Revenue 4 259,313 202,041 408,656
Cost of sales before exceptional items (158,728) (130,041) (267,662)
Exceptional cost of sales 5 (756) 3,501 3,495
Cost of sales (159,484) (126,540) (264,167)
Gross profit 99,829 75,501 144,489
Distribution costs (26,065) (19,239) (38,829)
Administrative expenses before exceptional items (23,744) (20,225) (41,511)
Exceptional administrative items 5 - (176) (287)
Administrative expenses (23,744) (20,401) (41,798)
Profit on disposal of property, plant and equipment before exceptional items (73) 1,760 1,638
Exceptional profit on disposal of property, plant and equipment 5 - 2,036 2,022
Total profit on disposal of property, plant and equipment (73) 3,796 3,660
Other income 1,353 1,348 2,524
Other expenses (195) (197) (112)
Operating profit 51,105 40,808 69,934
Finance costs (1,853) (2,556) (5,831)
Finance income 1,971 584 839
Net finance cost 118 (1,972) (4,992)
Profit before taxation 51,223 38,836 64,942
Taxation 6 (10,415) (27,863) (33,129)
Profit for the financial period 40,808 10,973 31,813
Profit attributable to:
Owners of the parent 40,808 10,973 31,813
Notes pence per share pence per share pence per share
Earnings per share
Basic 7 10.0 2.7 7.8
Diluted 7 10.0 2.7 7.7
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2022
Unaudited Unaudited Audited
Notes Half year ended 30/06/2022 Half year ended 30/06/2021 Year ended 31/12/2021
£'000 £'000 £'000
Profit for the financial period 40,808 10,973 31,813
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to profit or loss
Change in fair value of cash flow hedges(2) 10 468 - (74)
Realised fair value losses transferred to property, plant and equipment(2) 14 - -
Related tax movements(2) (51) - 14
431 - (60)
Items that will not be reclassified to profit or loss
Remeasurement of post employment benefit assets and obligations(3) 11 (2,543) (1,741) 12,862
Related tax movements(3) 637 1,127 (2,525)
(1,906) (614) 10,337
Other comprehensive (expense)/income for the period net of tax (1,475) (614) 10,277
Total comprehensive income for the period, net of tax 39,333 10,359 42,090
Total comprehensive income attributable to:
Owners of the parent 39,333 10,359 42,090
Non-GAAP measure
Reconciliation of adjusted EBITDA(1) to Operating profit for the financial
period:
Unaudited Unaudited Audited
Notes Half year ended 30/06/2022 Half year ended 30/06/2021 Year ended 31/12/2021
Operating profit 51,105 40,808 69,934
Add back/(less) exceptional costs/(credit) impacting operating profit 5 756 (5,361) (5,230)
Add back depreciation and amortisation 18,882 19,306 38,349
Adjusted EBITDA(1) 70,743 54,753 103,053
(1) Alternative performance measures are described in Note 3 to the interim
financial statements.
(2) Impacting the cash flow hedging reserve.
(3) Impacting retained earnings.
Condensed consolidated balance sheet
as at 30 June 2022
Unaudited Unaudited Audited
Notes 30/06/2022 30/06/2021 31/12/2021
£'000 £'000 £'000
Assets
Non-current assets
Intangible assets 91,264 91,695 94,625
Property, plant and equipment 383,928 372,412 375,800
Right-of-use assets 26,479 26,311 25,114
Derivative financial instruments 10 130 - -
Post-employment benefit asset 11 56,219 42,521 57,754
558,020 532,939 553,293
Current assets
Inventories 78,049 66,209 72,821
Trade and other receivables 93,383 82,241 64,756
Current tax receivable 111 - 3,199
Derivative financial instruments 10 278 - -
Cash and cash equivalents 64,517 15,930 61,199
236,338 164,380 201,975
Assets held for sale 875 - 875
Total assets 795,233 697,319 756,143
Current liabilities
Trade and other payables (124,583) (99,112) (103,132)
Borrowings 9 (424) (372) (333)
Lease liabilities (6,701) (6,285) (6,860)
Derivative financial instruments 10 - - (74)
Current tax payable - (178) -
Provisions (1,209) (2,755) (1,869)
(132,917) (108,702) (112,268)
Net current assets 104,296 55,678 90,582
Total assets less current liabilities 662,316 588,617 643,875
Non-current liabilities
Borrowings 9 (99,753) (69,024) (99,738)
Lease liabilities (21,297) (22,113) (20,324)
Deferred tax liabilities (97,466) (86,963) (92,352)
Provisions (7,008) (8,224) (8,232)
(225,524) (186,324) (220,646)
Total liabilities (358,441) (295,026) (332,914)
Net assets 436,792 402,293 423,229
Equity
Share capital 4,096 4,096 4,096
Share premium 4,458 4,382 4,458
Retained earnings 804,942 763,496 785,609
Other reserves 12 (376,704) (369,681) (370,934)
Total equity 436,792 402,293 423,229
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2022
Share capital Share premium Retained earnings Other reserves (see Note 12) Total equity attributable to owners
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 4,096 4,458 785,609 (370,934) 423,229
Profit for the period - - 40,808 - 40,808
Other comprehensive expense - - (1,906) 431 (1,475)
Total comprehensive income for the period - - 38,902 431 39,333
Transactions with owners:
Share based payments - - 857 - 857
Deferred tax on share based payments - - 109 - 109
Equity dividends paid - - (20,438) - (20,438)
Shares purchased - share buyback scheme (Note 12) - - - (6,298) (6,298)
Issue of own shares held on exercise of share options - - (97) 97 -
At 30 June 2022 (unaudited) 4,096 4,458 804,942 (376,704) 436,792
Balance at 1 January 2021 4,096 4,333 759,483 (370,041) 397,871
Profit for the period - - 10,973 - 10,973
Other comprehensive expense - - (614) - (614)
Total comprehensive income for the period - - 10,359 - 10,359
Transactions with owners:
Share based payments - - 295 - 295
Deferred tax on share based payments - - 11 - 11
Equity dividends paid - - (6,547) - (6,547)
Issue of own shares held on exercise of share options - - (105) 360 255
Issue of share capital on exercise of share options - 49 - - 49
At 30 June 2021 (unaudited) 4,096 4,382 763,496 (369,681) 402,293
Balance at 1 July 2021 4,096 4,382 763,496 (369,681) 402,293
Profit for the period - - 20,840 - 20,840
Other comprehensive income - - 10,965 (74) 10,891
Total comprehensive income for the period - - 31,805 (74) 31,731
Transactions with owners:
Share based payments - - 595 - 595
Deferred tax on share based payments - - 24 - 24
Equity dividends paid - - (10,233) - (10,233)
Purchase of own shares - - - (1,309) (1,309)
Issue of own shares held on exercise of share options - - (78) 130 52
Issue of share capital on exercise of share options - 76 - - 76
At 31 December 2021 (audited) 4,096 4,458 785,609 (370,934) 423,229
Condensed consolidated cash flow statement
for the six months ended 30 June 2022
Unaudited Unaudited Audited
Half year ended 30/06/2022 Half year ended 30/06/2021 Year ended 31/12/2021
£'000 £'000 £'000
Cash flow from operating activities
Cash generated from operations (Note 8) 59,544 38,551 100,497
Interest paid (1,345) (1,519) (2,928)
Other interest paid - lease liabilities (234) (377) (1,107)
Tax paid (768) (4,010) (9,960)
Net cash inflow from operating activities 57,197 32,645 86,502
Cash flows from investing activities
Purchase of property, plant and equipment (18,769) (10,059) (24,960)
Proceeds from sale of property, plant and equipment 8 837 874
Proceeds from sale of property, plant and equipment - exceptional - 2,882 2,882
Purchase of intangible assets (4,013) - (6,402)
Settlement of deferred consideration - - (413)
Net cash outflow from investing activities (22,774) (6,340) (28,019)
Cash flows from financing activities
Dividends paid (20,438) (6,547) (16,780)
Drawdown of borrowings - - 170,000
Repayment of borrowings - (20,000) (160,000)
Debt issue costs - - (1,563)
Repayment of lease liabilities (4,564) (3,649) (7,575)
Proceeds from issuance of equity shares - 255 432
Purchase of own shares by Employee Benefit Trust - - (1,309)
Cash outflow from purchase of shares (6,099) - -
Net cash outflow from financing activities (31,101) (29,941) (16,795)
Net increase/(decrease) in cash and cash equivalents 3,322 (3,636) 41,688
Cash and cash equivalents at beginning of the year 61,199 19,552 19,552
Exchange (losses)/gains on cash and cash equivalents (4) 14 (41)
Cash and cash equivalents at end of the period 64,517 15,930 61,199
1. AUTHORISATION OF FINANCIAL STATEMENTS
Ibstock plc ("Ibstock" or "the Group") is a manufacturer of clay bricks and
concrete products with operations in the United Kingdom. Ibstock plc is a
public company limited by shares, which is incorporated and registered in
England. The registered office is Leicester Road, Ibstock, Leicestershire,
LE67 6HS and the company registration number is 09760850.
The interim condensed consolidated financial statements of Ibstock plc for the
six months ended 30 June 2022 were authorised for issue in accordance with a
resolution of the Directors on 26 July 2022. All disclosed documents relating
to these results are available on the Group's website at www.ibstockplc.co.uk
(http://www.ibstockplc.co.uk) .
Publication of non-statutory accounts
The financial information contained in the interim statement does not
constitute the Group's statutory accounts as defined in section 434 of the
Companies Act 2006. The comparative figures for the financial period ended 31
December 2021, which have been extracted from the statutory accounts for that
period, are not the Company's statutory accounts for that financial period.
Statutory accounts for the year ended 31 December 2021 were approved by the
Board of Directors on 8 March 2022. Those accounts have been reported on by
the Company's auditor and delivered to the Registrar of Companies. The report
of the auditor was (i) not qualified, (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis of matter
without qualifying their report, and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
2. BASIS OF PREPARATION
The interim condensed consolidated financial statements for the six months
ended 30 June 2022 have been prepared in accordance with International
Accounting Standard 34 Interim Financial Reporting as contained in UK-adopted
IFRS.
They do not include all of the information and disclosures required in the
annual financial statements, and should be read in conjunction with the
Group's Annual Report and Accounts as at 31 December 2021, which have been
prepared in accordance with International Financial Reporting Standards
("IFRS") as contained in UK-adopted IFRS.
The condensed consolidated financial statements are presented in Sterling and
all values are rounded to the nearest thousand, except where otherwise
indicated.
All accounting policies applied by the Group within the interim condensed
consolidated financial statements are consistent with those applied by the
Group in its consolidated financial statements for the year ended
31 December 2021, except in respect of taxation, which is based on the
expected effective tax rate that would be applicable to expected annual
earnings.
The following new and amended standards and interpretations have been adopted
in the preparation of the condensed consolidated financial statements:
(a) Property, Plant and Equipment: Proceeds before Intended Use - Amendments
to IAS 16
(b) Onerous Contracts - Cost of Fulfilling a Contract - Amendments to IAS 37
(c) Annual Improvements to IFRS Standards 2018-2020
(d) Reference to the Conceptual Framework - Amendments to IFRS 3.
None of the above standards has had a material impact on the Group's
accounting policies. There are no other standards and amendments have been
issued by the IASB since the publication of the Group's results for the year
ended 31 December 2021, which have either not been adopted by the IFRS as
contained in UK-adopted IFRS or are not yet effective in UK-adopted IFRS at 30
June 2022 and which management expects would have a material impact on the
Group.
In preparing the interim condensed consolidated financial statements the Group
has assessed the critical accounting estimates and judgements applied in the
preparation of the consolidated financial statements for the year ended 31
December 2021. The areas of critical judgement relating to exceptional items
(see Note 5), and significant source of estimation uncertainty regarding the
Group's pension scheme liability valuation assumptions surrounding future
changes in discount rates, inflation, the rate of increase in pensions in
payment and life expectancy (see Note 11) are still considered critical to the
preparation of the interim financial statements for the period ended 30 June
2022.
Going concern
The Group's financial planning and forecasting process consists of a budget
for the current year followed by a medium term projection and re-forecasts the
current year performance on a quarterly basis. The going concern period covers
to December 2023. The Directors have reviewed and robustly challenged the
assumptions about future trading performance, operational and capital
expenditure and debt requirements within these forecasts including the Group's
liquidity and covenant forecasts, and stress tested within their going concern
assessment.
In arriving at their conclusion on going concern, the Directors have given due
consideration to whether the funding and liquidity resources above are
sufficient to accommodate the principal risks and uncertainties faced by the
Group, particularly those relating to economic conditions and operational
disruption.
Group forecasts have been prepared which reflect both actual performance
conditions and estimates of the future reflecting macroeconomic and
industry-wide projections, as well as matters specific to the Group. Capital
enhancement projects in the clay network were completed during H1 2022,
increasing capacity 5% on 2021 levels.
The Group's committed facilities at 30 June 2022 comprise £100 million of
private placement notes with maturities of between 7 and 12 years and a £125
million Revolving Credit Facility (RCF) for an initial four year tenor, with a
one year extension option. At 30 June 2022, the RCF was undrawn.
Covenants under the Group's RCF and private placement notes require leverage
of no more than 3 times net debt to adjusted EBITDA(1), and interest cover of
no less than 4 times, tested bi-annually at each reporting date with reference
to the previous 12 months. At 30 June 2022, covenant requirements were met
with significant headroom.
The key uncertainty faced by the Group is the industry demand for its products
in light of macroeconomic factors. Accordingly, the Group has modelled
financial scenarios, which see reduction in the industry demands for its
products thereby stress testing the Group's resilience. For each scenario,
cash flow and covenant compliance forecasts have been prepared. In the severe
but plausible scenario industry demand for Clay products is projected to be
around 30% lower for a year, which is broadly in line with the sales reduction
seen in the Clay division in 2020 during the height of the COVID-19 pandemic,
recovering to around 5% lower after this time.
In addition, the Group has prepared a reverse stress test to evaluate the
industry demand reduction at which it would be likely to breach the debt
covenants, before any further mitigating actions were taken. This test
indicates that, at a reduction of 82% in sales volumes in the second half of
2022 or a 38% during the period up to the first half of 2023 or a 38% during
the period up 31 December 2023, the Group would be at risk of breaching its
covenants.
In the severe but plausible low case, the Group has sufficient liquidity and
headroom against its covenants, with covenant headroom expressed as a
percentage of last twelve months adjusted EBITDA(1) being greater than 70%.
The Directors consider this to be an highly unlikely scenario, and in the
event of an anticipated covenant breach, the Group would seek to take further
steps to mitigate, including the disposal of valuable land and building assets
and additional restructuring steps to reduce the fixed cost base of the Group.
Having taken account of the various scenarios modelled, and in light of the
mitigations available to the Group, the Directors are satisfied that the Group
has sufficient resources to continue in operation for a period of not less
than 12 months from the date of this report. Accordingly, the consolidated
financial information has been prepared on a going concern basis.
3. ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures ("APMs") are used within the interim
management report where management believes it is necessary to do so in order
to provide further understanding of the financial performance of the Group.
Management uses APMs in its own assessment of the Group's performance and in
order to plan the allocation of internal capital and resources. Certain APMs
are also used in the remuneration of management and Executive Directors.
APMs serve as supplementary information for users of the financial statements
and it is not intended that they are a substitute for, or superior to,
statutory measures. None of the APMs is outlined within IFRS and they may not
be comparable with similarly titled APMs used by other companies.
In the current period, the previously reported APMs of like-for-like revenue
and like-for-like Adjusted EBITDA margin have been removed to reflect full
current and comparative period ownership of the Longley business eliminating
the need for these measures.
Within the interim management report, APMs are identified with a superscript.
Exceptional items
The Group presents as exceptional on the face of the income statement those
items of income and expense which, because of their materiality, nature and/or
expected infrequency of the events giving rise to them, merit separate
presentation to allow users of the financial statements to understand further
elements of financial performance in the year. This facilitates comparison
with future periods and to assess trends in financial performance over time.
Details of all exceptional items are disclosed in Note 5.
Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA represents the earnings before interest, taxation,
depreciation and amortisation adjusted for exceptional items. Adjusted EBITDA
margin is Adjusted EBITDA shown as a proportion of revenue.
The Directors regularly use Adjusted EBITDA and Adjusted EBITDA margin as key
performance measures in assessing the Group's profitability. The measures are
considered useful to users of the financial statements as they represent
common APMs used by investors in assessing a company's operating performance,
when comparing its performance across periods as well as being used in the
determination of Directors' variable remuneration.
A full reconciliation of Adjusted EBITDA is included at the foot of the
Group's consolidated statement of comprehensive income within the consolidated
financial statements. Adjusted EBITDA margin is included within Note 4.
Adjusted Effective Tax Rate ("Adjusted ETR")
The Group presents adjusted effective tax rate (Adjusted ETR) within its
Financial Review. This is disclosed in order to provide users of the financial
statements with a view of the rate of taxation borne by the Group prior to the
impact of non-deductible exceptional items (defined above) and the changes in
taxation rates on deferred taxation.
A reconciliation of the adjusted ETR to the statutory rate of taxation in the
UK is set out below.
Unaudited Unaudited Audited
Half year ended 30/06/2022 Half year ended 30/06/2021 Year ended 31/12/2021
Statutory rate of taxation in the UK 19.0% 19.0% 19.0%
Less impact of permanent differences* (1.4%) (0.6%) (1.0%)
Less impact of changes in estimates re. prior periods (0.2%) (0.8%) 0.1%
Adjusted ETR 17.4% 17.6% 18.1%
Less impact of difference in prior period true-up recognition - (1.1%) (0.4%)
Effect of higher rate applied to deferred tax 2.9% 55.2% 33.3%
Reported ETR 20.3% 71.7% 51.0%
* The impact of permanent differences primarily comprises the benefit from the
UK super deduction on qualifying capital expenditure
Adjusted EPS
Adjusted EPS is the basic earnings per share adjusted for exceptional items,
fair value adjustments (being the amortisation and depreciation on fair value
uplifted assets) and non-cash interest, net of taxation (at the Group's
adjusted effective tax rate).
The Directors have presented Adjusted EPS as they believe the APM represents
useful information to the user of the financial statements in assessing the
performance of the Group, when comparing its performance across periods, as
well as being used within the determination of Directors' variable
remuneration. Additionally, the APM is considered by management when
determining the proposed level of ordinary dividend.
A full reconciliation is provided in Note 7.
Net debt and Net debt to Adjusted EBITDA ("leverage") ratio
Net debt is defined as the sum of cash and cash equivalents less total
borrowings at the balance sheet date. This does not include lease liabilities
arising upon application of IFRS 16 in order to align with the Group's banking
facility covenant definition.
Net debt to adjusted EBITDA is the ratio of net debt to adjusted EBITDA. The
net debt to adjusted EBITDA ratio definition removes the benefit of IFRS 16
within adjusted EBITDA.
The Directors disclose these APMs to provide information as a useful measure
for assessing the Group's overall level of financial indebtedness and when
comparing its performance and position across periods..
A full reconciliation of net debt and the net debt to adjusted EBITDA ratio
(also referred to as 'leverage') is set out in Note 9.
Return on capital employed
Return on capital employed (ROCE) is defined as earnings before interest and
taxation adjusted for exceptional items as a proportion of the average capital
employed (defined as net debt plus equity excluding the pension surplus). The
average is calculated using the current period end balance and corresponding
preceding reported period end balance (year end or interim).
The Directors disclose the ROCE APM in order to provide users of the financial
statements with an indication of the relative efficiency of capital use by the
Group over the period, assessing performance between periods as well as being
used within the determination of executives' variable remuneration.
The calculation of ROCE is set out below:
Unaudited Unaudited Audited
Half year ended 30/06/2022 Half year ended 30/06/2021 Year ended 31/12/2021
£'000 £'000 £'000
Adjusted EBITDA 119,043 97,362 103,053
Less depreciation (30,984) (30,970) (31,409)
Less amortisation (6,941) (6,936) (6,940)
Adjusted earnings before interest and taxation 81,118 59,456 64,704
Average net debt 37,266 61,325 46,169
Average equity 430,011 400,082 412,761
Average pension (56,987) (43,049) (50,138)
Average capital employed 410,290 418,358 408,792
ROCE 19.8% 14.2% 15.8%
Average capital employed figures comprise: 30 June 2022 31 December 2021 30 June 2021 31 December 2020
£'000 £'000 £'000 £'000
Net debt 35,660 38,872 53,466 69,184
Equity 436,792 423,229 402,293 397,871
Pension 56,219 57,754 42,521 43,576
Cash flow related APMs
The Group presents an adjusted cash flow statement within its Financial
Review. This is disclosed in order to provide users of the financial
statements with a view of the Group's operating cash generation before the
impact of cash flows associated with exceptional items (as set out in Note 5)
and with the inclusion of interest, lease payment and property disposal
related cash flows.
The Directors use this APM table to allow shareholders to further understand
the Group's cash flow performance in the period, to facilitate comparison with
future years and to assess trends in financial performance. This table
contains a number of APMs, as described below and reconciled in the following
table:
Adjusted change in working capital
Adjusted change in working capital represents the statutory change in working
capital adding back cash inflows associated with exceptional items arising in
the year of £0.2 million (30 June 2021: adding back £2.1 million; 31
December 2021: adding back £2.0 million).
Adjusted operating cash flow
Adjusted operating cash flows are the cash flows arising from operating
activities adjusted to exclude cash flows relating to exceptional items of
£0.4 million (30 June 2021: £3.7 million; 31 December 2021: £1.7 million)
and inclusion of cash flows associated with interest income, proceeds from the
sale of property, plant and equipment, purchase of intangibles and lease
payments reclassified from investing or financing activities of £8.6 million
(30 June 2021: £2.8 million; 31 December 2021: £12.2 million).
Cash conversion
Cash conversion is the ratio of Adjusted operating cash flow (defined above)
to Adjusted EBITDA (defined above). The Directors believe this APM provides a
useful measure of the Group's efficiency of its cash management during the
period.
Adjusted free cash flow
Adjusted free cash flow represents Adjusted operating cash flow (defined
above) less total capital expenditure. The Directors use the measure of
Adjusted free cash flow as a measure of the funds available to the Group for
the payment of distributions to shareholders, for use within M&A activity
and other investing and financing activities.
Reconciliation of statutory cash flow statement to adjusted cash flow
statement
Six months ended 30 June 2022 (unaudited) Statutory Exceptional Reclassification Adjusted
£'000 £'000 £'000 £'000
Adjusted EBITDA 69,987 756 - 70,743
Change in working capital (10,689) 167 - (10,522)
Impairment charges 554 (554) - -
Net interest (1,579) - - (1,579)
Tax (768) - - (768)
Post-employment benefits (488) - (387) (875)
Other 180 - (8,182) (8,002)
Adjusted operating cash flow 57,197 369 (8,569) 48,997
Cash conversion 69%
Total capex (18,769) - - (18,769)
Adjusted free cash flow 38,428 369 (8,569) 30,228
Six months ended 30 June 2021 (unaudited) Statutory Exceptional Reclassification Adjusted
£'000 £'000 £'000 £'000
Adjusted EBITDA 55,215 (462) - 54,753
Change in working capital (11,989) 2,089 - (9,900)
Net interest (1,896) - - (1,896)
Tax (4,010) - - (4,010)
Post-employment benefits (424) - (451) (875)
Other (4,251) 2,036 (2,361) (4,576)
Adjusted operating cash flow 32,645 3,663 (2,812) 33,496
Cash conversion 61%
Total capex (10,059) - - (10,059)
Adjusted free cash flow 22,586 3,663 (2,812) 23,437
Year ended 31 December 2021 (audited) Statutory Exceptional Reclassification Adjusted
£'000 £'000 £'000 £'000
Adjusted EBITDA 108,283 (5,230) - 103,053
Change in working capital 3,330 2,028 - 5,358
Impairment charges (5,797) 5,797 - -
Net interest (4,035) - (1,563) (5,598)
Tax (9,960) - - (9,960)
Post-employment benefits (789) - (961) (1,750)
Other (4,530) (860) (9,673) (15,063)
Adjusted operating cash flow 86,502 1,735 (12,197) 76,040
Cash conversion 74%
Total capex (24,960) - - (24,960)
Adjusted free cash flow 61,542 1,735 (12,197) 51,080
4. SEGMENT REPORTING
The Directors consider the Group's reportable segments to be the Clay and
Concrete divisions.
The key Group performance measure is adjusted EBITDA(1), as detailed below,
which is defined in Note 3. The tables, below, present revenue and adjusted
EBITDA(1) and profit/(loss) before taxation for the Group's operating
segments.
Included within the unallocated and elimination columns in the tables below
are costs including share based payments and Group employment costs.
Unallocated assets and liabilities are pensions, taxation and certain
centrally held provisions. Transactions between segments are carried out at
arm's length. There is no material inter-segmental revenue and no aggregation
of segments has been applied.
Six months ended 30 June 2022
Clay Concrete Unallocated Total
£'000 £'000 £'000 £'000
Total revenue 185,532 73,781 - 259,313
Adjusted EBITDA(1) 64,377 11,318 (4,952) 70,743
Adjusted EBITDA(1) margin 34.7% 15.3% 27.3%
Exceptional items impacting operating profit (see Note 5) (756) - - (756)
Depreciation and amortisation pre fair value uplift (10,452) (2,902) (67) (13,421)
Incremental depreciation and amortisation following fair value uplift (3,391) (2,070) - (5,461)
Net finance costs 965 (218) (629) 118
Profit/(loss) before tax 50,743 6,128 (5,648) 51,223
Taxation (10,415)
Profit for the period 40,808
Six months ended 30 June 2021
Clay Concrete Unallocated Total
£'000 £'000 £'000 £'000
Total revenue 138,269 63,772 - 202,041
Adjusted EBITDA(1) 47,209 11,768 (4,224) 54,753
Adjusted EBTIDA margin(1) 34.1% 18.5% 27.1%
Exceptional items impacting operating profit (Note 5) 5,727 (366) - 5,361
Depreciation and amortisation pre fair value uplift (11,114) (2,664) (68) (13,846)
Incremental depreciation and amortisation following fair value uplift (3,223) (2,237) - (5,460)
Net finance costs (79) (115) (1,778) (1,972)
Profit/(loss) before tax 38,520 6,386 (6,070) 38,836
Taxation (27,863)
Profit for the period 10,973
Year ended 31 December 2021
Clay Concrete Unallocated Total
£'000 £'000 £'000 £'000
Total revenue 280,235 128,421 - 408,656
Adjusted EBITDA(1) 90,634 21,740 (9,321) 103,053
Adjusted EBTIDA margin(1) 32.3% 16.9% 25.2%
Exceptional items impacting operating profit (Note 5) 5,347 (117) - 5,230
Depreciation and amortisation pre fair value uplift (22,101) (5,981) (135) (28,217)
Incremental depreciation and amortisation following fair value uplift (5,834) (4,298) - (10,132)
Net finance costs (809) (202) (3,981) (4,992)
Profit/(loss) before tax 67,237 11,142 (13,437) 64,942
Taxation (33,129)
Loss for the year 31,813
Clay Concrete Unallocated Total
Total segment assets £'000 £'000 £'000 £'000
At 30 June 2022 579,884 152,150 63,199 795,233
At 31 December 2021 547,472 145,478 63,193 756,143
At 30 June 2021 513,208 138,333 45,778 697,319
Clay Concrete Unallocated Total
Total segment liabilities £'000 £'000 £'000 £'000
At 30 June 2022 (178,484) (59,631) (120,326) (358,441)
At 31 December 2021 (155,589) (56,764) (120,561) (332,914)
At 30 June 2021 (153,231) (56,002) (85,793) (295,026)
Seasonality
Historically, activity of the Group's trading operations occurs throughout the
year and is largely unaffected by seasonal factors. In the year ended 31
December 2021, the period to 30 June accounted for 49.4% of the Group's annual
revenue and 53.1% of the Group's annual adjusted EBITDA. During the current
financial year, absent further significant disruption because of global
macroeconomic uncertainties, including any recurrence of the COVID-19
pandemic, management anticipates a distribution of revenue and adjusted EBITDA
weighted somewhat towards the first half.
5. EXCEPTIONAL ITEMS(1)
Unaudited Unaudited Audited
Half year ended 30/06/2022 Half year ended 30/06/2021 Year ended 31/12/2021
£'000 £'000 £'000
Exceptional cost of sales
Impairment (charge)/reversal - Property, plant and equipment (554) 4,899 5,623
Impairment reversal - Right-of-use assets - - 174
Total impairment charges (554) 4,899 5,797
Other costs associated with restructuring programme (202) (1,398) (2,302)
Total exceptional cost of sales (756) 3,501 3,495
Exceptional administrative expenses:
Redundancy savings/(costs) - 11 (100)
COVID-19 administrative expenses - (187) (187)
Total exceptional administrative expenses - (176) (287)
Exceptional profit on disposal of property, plant and equipment - 2,036 2,022
Exceptional items impacting operating profit (756) 5,361 5,230
Total exceptional items (756) 5,361 5,230
Period ended 30 June 2022
Included within the current period are the following exceptional items:
Exceptional cost of sales
Impairment charges incurred in the current period relate to the impairment of
non-current assets at the sites earmarked for closure in a prior period as
part of the Group's single coordinated plan in response to the COVID-19
pandemic. In order to remain consistent with prior years, and due to their
non-recurring nature, these costs were categorised as exceptional. Similar
costs are not expected to arise in the future.
Other costs associated with restructuring programme represent costs incurred
as a result of the Group's restructuring programme announced during 2H 2020.
These costs include site security, insurance, rates and other standing charges
in connection with closed sites. These costs were categorised as exceptional
due to the non-recurring nature of the event giving rise to the costs. Further
costs related to this programme are not expected to arise in the future.
Tax on exceptional items
In the current period, impairment charges arising on non-current assets are
not tax deductible but gave rise to a deferred tax credit in the prior period
and as such are not tax rate impacting. The costs associated with the closure
of sites are tax deductible.
Six-month period ended 30 June 2021 and year ended 31 December 2021
Details of exceptional items included within the prior interim and full year
periods are disclosed within Note 5 of the Group's 2021 interim results and
2021 Annual report and accounts, respectively.
6. TAXATION
The taxation charge for the interim period is an estimate based on the
expected full year effective tax rate.
7. EARNINGS PER SHARE
The basic earnings per share figures are calculated by dividing profit for the
year attributable to the Parent shareholders by the weighted average number of
Ordinary Shares in issue during the year.
The diluted earnings per share figures allow for the dilutive effect of the
conversion into Ordinary Shares of the weighted average number of options
outstanding during the year. Where the average share price for the year is
lower than the option price the options become anti-dilutive and are excluded
from the calculation.
The number of shares used for the earnings per share calculation are as
follows:
Half year ended 30/06/2022 Half year ended 30/06/2021 Year ended 31/12/2021
(000s) (000s) (000s)
Basic weighted average number of Ordinary Shares 408,300 409,146 409,118
Effect of share incentive awards and options 611 1,145 1,494
Diluted weighted average number of Ordinary Shares 408,911 410,291 410,612
The calculation of adjusted earnings per share(1) is a key measurement used by
management that is not defined by IFRS. The adjusted earnings per share(1)
measures should not be viewed in isolation, but rather treated as
supplementary information.
Adjusted earnings per share(1) figures are calculated as the Basic earnings
per share adjusted for exceptional items(1), fair value adjustments being the
amortisation and depreciation on fair value uplifted assets and non-cash
interest expenses. Adjustments are made net of the associated taxation impact
at the adjusted effective tax rate.
A reconciliation of the statutory profit to that used in the adjusted earnings
per share(1) calculations is as follows:
Unaudited Unaudited Audited
Half year ended 30/06/2022 Half year ended 30/06/2021 Year ended 31/12/2021
£000 £000 £000
Profit/(loss) for the period attributable to the parent shareholders 40,808 10,973 31,813
Add back/(less) exceptional costs/(credit) (Note 5) 756 (5,361) (5,230)
(Less)/add back tax (credit)/charge on exceptional items (132) 946 695
Add fair value adjustments (Note 4) 5,461 5,460 10,132
Less tax credit on fair value adjustments (951) (963) (1,834)
(Less)/add back net non-cash interest (1,703) 76 (606)
Add back/(less) tax expense/(credit) on non-cash interest 296 (13) 110
Less impact of difference in prior year tax true-up recognition - (419) -
Add back impact of deferred taxation rate change 1,500 21,430 21,628
Adjusted profit for the period attributable to the parent shareholders 46,035 32,129 56,708
Half year ended 30/06/2022 Half year ended 30/06/2021 Year ended 31/12/2021
pence pence pence
Basic EPS on profit for the period 10.0 2.7 7.8
Diluted EPS on profit for the period 10.0 2.7 7.7
Adjusted basic EPS on profit for the period 11.3 7.9 13.9
Adjusted diluted EPS on profit for the period 11.3 7.8 13.8
8. NOTES TO THE GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
Half year ended 30/06/2022 Half year ended 30/06/2021 Year ended 31/12/2021
Cash flows from operating activities £'000 £'000 £'000
Profit before taxation 51,223 38,836 64,942
Adjustments for:
Depreciation 15,413 15,838 31,409
Impairment of property plant and equipment 554 (4,899) (5,623)
Impairment of right-of-use assets - - (174)
Amortisation of intangible assets 3,469 3,468 6,940
Finance costs (118) 1,972 4,992
Loss/(gain) on disposal of property, plant and equipment 73 (3,796) (3,660)
Research and development expenditure credit (750) (750) (1,673)
Share based payments 857 295 890
Post-employment benefits (488) (424) (789)
Other - - (87)
70,233 50,540 97,167
Increase in inventory (5,228) (2,823) (9,435)
Increase in trade and other receivables (28,642) (21,227) (2,617)
Increase in trade and other creditors 23,704 13,520 18,504
Decrease in provisions (523) (1,459) (3,122)
Cash generated from operations 59,544 38,551 100,497
During the six months ended 30 June 2022, the Group acquired assets with a
cost of £18.8 million (period ended 30 June 2021: £10.1 million; year ended
31 December 2021: £25.0 million). Assets of £0.1 million were disposed of
during the current period for nil proceeds (period ended 30 June 2021: £2.0
million for proceeds of £3.7 million; year ended 31 December 2021: £2.2
million for proceeds of £5.8 million). Capital expenditure commitments for
which no provision has been made were £79.9 million at 30 June 2022 (30 June
2021: £73.7 million; 31 December 2021: £57.4 million).
9. BORROWINGS, AND MOVEMENTS IN CASH AND NET DEBT
At 30 June 2022, the Group held £100 million of private placement notes from
Pricoa Private Capital, with maturities of between 7 and 12 years and an
average total cost of funds of 2.19% (range 2.04%-2.27%). The agreement also
contains an additional uncommitted shelf facility of up to $88.1 million (or
equivalent in available currencies). The facility contains debt covenant
requirements of leverage (net debt to adjusted EBITDA(1)) and interest cover
(adjusted EBITDA(1) to net finance charges) of 3x and 4x, respectively, tested
semi-annually on 30 June and 31 December in respect of the preceding 12-month
period.
Additionally, a £125 million RCF facility was held with a syndicate of five
banks for an initial four year period ending in November 2025, with a one year
extension option. Interest is charged at a margin (depending upon the ratio of
net debt to Adjusted EBITDA(1)) of between 160bps and 260bps above SONIA, SOFR
or EURIBOR according to the currency of the borrowing. The facility also
includes an additional £50 million uncommitted accordion facility. Based on
current leverage(1), the Group will pay interest under the RCF initially at a
margin of 160bps. This facility contains debt covenant requirements that align
with those of the private placement with the same testing frequency. The RCF
was undrawn throughout the current six-month period and subsequently up to the
date of approval of these interim results.
The carrying value of financial liabilities have been assessed as materially
in line with their fair values. No security is currently provided over the
Group's borrowings.
Details of borrowing facilities held at the prior interim period and full year
end dates are disclosed within Note 9 and Note 19 of the Group's 2021 interim
results and 2021 Annual report and accounts, respectively.
Unaudited Unaudited Audited
30 June 2022 30 June 2021 31 December
2021
£'000 £'000 £'000
Cash and cash equivalents 64,517 15,930 61,199
Current
Privale placement (324) - (333)
Revolving Credit Facility (100) (372) -
(424) (372) (333)
Non-current
Private placement (99,753) - (99,738)
Revolving Credit Facility - (69,024) -
(99,753) (69,024) (99,738)
Net debt (35,660) (53,466) (38,872)
Net debt to adjusted EBITDA ratio
Net debt (35,660) (53,466) (38,872)
Last 12 months adjusted EBITDA(1) 119,043 97,362 103,053
Impact of IFRS 16 (7,834) (6,983) (7,171)
Adjusted EBITDA(1) prior to IFRS 16 111,209 90,379 95,882
0.3x 0.6x 0.4x
10. FINANCIAL INSTRUMENTS
IFRS 13 'Financial Instruments: Disclosures' requires fair value measurements
to be recognised using a fair value hierarchy that reflects the significance
of the inputs used in the measurements, according to the following levels:
Level 1 - Unadjusted quoted prices in active markets for identical assets or
liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices).
Level 3 - Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs).
At 30 June 2022, 31 December 2021 and 30 June 2021, the Group's fair value
measurements were categorised as Level 2, except for quoted investments within
the Group's pension (valued at £148,725,000 at 30 June 2022, £177,401,000 at
31 December 2021 and £177,055,000 at 30 June 2021), which were valued as
Level 1.
The Group entered into forward currency contracts as cash flow hedges to
manage its exposure of foreign currency fluctuations associated with the
future purchases of plant and equipment required for the construction of the
major capital expenditure projects. These instruments are measured at fair
value using Level 2 valuation techniques subsequent to initial recognition.
At 30 June 2022, an asset valued at £408,000 (31 December 2021: a liability
of £74,000; 30 June 2021: £nil) was recognised for these derivative
financial instruments. An amount of £14,000 was transferred to property,
plant and equipment in the six-month period ended 30 June 2022. No amounts
have been reclassified to profit or loss as a result of the hedged cash flow
during the period.
At 30 June 2022, 31 December 2021 and 30 June 2021, all of the Group's fair
value measurements have been categorised as Level 2 with the exception of (i)
certain equities within the Group's pension scheme, which were categorised as
Level 1 valuations and (ii) the insured pensioner asset, which was categorised
as a Level 3 valuation and uses assumptions set out in Note 11 to align its
valuation to the related liability.
At 30 June 2022, 31 December 2021 and 30 June 2021, the Group held no other
significant derivative financial instruments. There were no transfers between
levels during any period disclosed.
The carrying value of the Group's short-term receivables and payables is a
reasonable approximation of their fair values. The fair value of all other
financial instruments carried within the Group's financial statements is not
materially different from their carrying amount.
11. POST EMPLOYMENT BENEFITS
The Group participates in the Ibstock Pension Scheme (the 'Scheme'), a defined
benefit pension scheme in the UK. During the six-month period to 30 June 2022,
the Scheme surplus of £57.8 million decreased to a surplus of
£56.2 million. Analysis of movements during the six-month period ended 30
June 2022:
£'000
Scheme surplus at 1 January 2022 (audited) 57,754
Charge within labour costs and operating profit (387)
Interest income 520
Remeasurement due to:
- Change in financial assumptions 146,629
- Change in demographic assumptions 444
- Experience losses (9,972)
- Return on plan assets (139,644)
Company contributions 875
Scheme surplus at 30 June 2022 (unaudited) 56,219
The slight deterioration in the balance sheet position over the period is
primarily due to increased levels of short-term inflation during the period,
leading to significant expected pension increases in deferment and payment to
be awarded in 2023. This has been offset by a significant actuarial gain
arising on the liabilities from a change in market conditions, particularly
reflecting the significant rise in corporate bond yields and therefore the
discount rate over the first half of 2022.
The financial assumptions used by the actuary have been derived using a
methodology consistent with the approach used to prepare the accounting
disclosures at 31 December 2021. The assumptions have been updated based on
market conditions at 30 June 2022:
Unaudited Unaudited Audited
30 June 2022 30 June 2021 31 December 2021
Per annum Per annum Per annum
Discount rate 3.65% 1.80% 1.80%
RPI inflation 3.20% 3.25% 3.40%
CPI inflation 2.60% 2.55% 2.70%
Rate of increase in pensions in payment 3.65% 3.65% 3.75%
Mortality assumptions: life expectation at age 65
For male currently aged 65 21.9 years 21.8 years 21.8 years
For female currently aged 65 24.5 years 24.5 years 24.5 years
For male currently aged 40 23.6 years 23.6 years 23.6 years
For female currently aged 40 26.4 years 26.3 years 26.3 years
Commutation factors - sample factor at age 65 17.31 17.31 17.31
12. RESERVES
Share premium
The share premium account is used to record the aggregate amount or value of
premiums paid when the Company's shares are issued/redeemed at a premium.
Other reserves
The movement in other reserves during the period is set out in the table
below:
Cash flow hedging reserve Merger reserve Own shares held Treasury shares Total other reserves
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 (74) (369,119) (1,741) - (370,934)
Other comprehensive income 431 - - - 431
Shares purchased - share buyback scheme - - - (6,298) (6,298)
Issue of own shares held on exercise of share options - - 97 - 97
At 30 June 2022 357 (369,119) (1,644) (6,298) (376,704)
-
Balance at 1 January 2021 - (369,119) (922) - (370,041)
Issue of own shares held on exercise of share options - - 360 - 360
At 30 June 2021 - (369,119) (562) - (369,681)
-
Balance at 1 July 2021 - (369,119) (562) - (369,681)
Other comprehensive expense (74) - - - (74)
Purchase of own shares - - (1,309) - (1,309)
Issue of own shares held on exercise of share options - - 130 - 130
At 31 December 2021 (74) (369,119) (1,741) - (370,934)
The Cash flow hedging reserve records movements for effective cash flow hedges
measured at fair value. See Note 10 for further detail.
The Merger reserve arose on the acquisition of Figgs Topco Limited by Ibstock
plc in the period ended 31 December 2015 and is the difference between the
share capital and share premium of Figgs Topco Limited and the nominal value
of the investment and preference shares in Figgs Topco Limited acquired by the
Company.
The Own shares held reserve represents the Group's holding in its own equity
instruments shown as a deduction from shareholders' equity at cost. These
shares represent shares held in the Employee Benefit Trust to meet the future
requirements of the employee share based payment plans. Consideration, if any,
received for the sale of such shares is also recognised in equity with any
difference between the proceeds from sale and the original cost being taken to
the profit and loss reserve. No gain or loss is recognised in the income
statement on the purchase, sale, issue or cancellation of equity shares.
The Treasury share reserve represents shares acquired by the Group as part of
its share buyback programme in 2022. In April 2022, the Group announced a £30
million share buyback programmes as part of its ongoing value creation
strategy. These shares are held by the Group to meet future requirements of
employee share based payment plans. At 30 June 2022, the Treasury shares
reserve contained 3,484,872 shares.
Commencing 10 May 2022, the Group engaged its brokers to purchase shares on
the open market on its behalf. The terms of these arrangements commit the
Group to further purchases of its own shares for up to c£24 million, which it
can revoke without penalty outside of regulatory close periods.
13. RELATED PARTY TRANSACTIONS
There are no related party transactions nor any related party balances in
either the 2021 or 2022 financial periods.
14. DIVIDENDS PAID AND PROPOSED
A final dividend for 2021 of 5.0 pence per ordinary share (2020: 1.6) was paid
on 13 May 2022. The Directors have declared an interim dividend of 3.3 pence
per ordinary share in respect of 2022 (2020: 2.5 pence), amounting to a
dividend of £13.4 million (2021: £10.2 million). The interim dividend will
be paid on 13 September 2022 to all shareholders on the register at close of
business on 19 August 2022.
These condensed consolidated financial statements do not reflect the 2022
interim dividend payable.
15. POST BALANCE SHEET EVENTS
Other than the interim dividend declared by the Directors (see Note 14), since
the balance sheet date no material subsequent events requiring further
disclosure or adjustments to these financial statements have been identified.
Independent Review Report to Ibstock plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2022 which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated statement of changes in
equity, the condensed consolidated cash flow statement and related notes 1 to
15.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
As disclosed in note 1, the annual financial statements of Ibstock Plc (the
"Group") will be prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in accordance
with United Kingdom adopted International Accounting Standard 34, "Interim
Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE (UK), however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the group a conclusion on the condensed set of financial
statement in the half-yearly financial report. Our conclusion, including our
Conclusions Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" issued by the
Financial Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our review work, for this report, or for the conclusions
we have formed.
Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
26 July 2022
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