REG - Ibstock PLC - Interim results
02/08/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230802:nRSB9874Ha&default-theme=true
RNS Number : 9874H Ibstock PLC 02 August 2023
Interim results
2 August 2023
LEI: 2138003QHTNX34CN9V93
Ibstock Plc
Interim results for the six months ended 30 June 2023
Resilient first half performance underpins confidence in full year
expectations
Ibstock Plc ("Ibstock" or the "Group"), a leading UK manufacturer of a diverse
range of building products and solutions, announces results for the six months
ended 30 June 2023.
Statutory Results
Six months ended 30 June 2023 2022 ∆ 1Y % change
Revenue £223m £259m (£36)m (14)%
Profit before taxation £30m £51m (£21)m (42)%
EPS 5.7p 10.0p (4.3)p (43)%
Adjusted Results(1)
Six months ended 30 June 2023 2022 ∆ 1Y % change
Adjusted EBITDA £63m £71m (£8)m (11)%
Adjusted EBITDA margin 28.2% 27.3% +90bps +3%
Adjusted EPS 9.0p 11.3p (2.3)p (20)%
Interim dividend per share 3.4p 3.3p +0.1p +3%
Adjusted free cashflow (£22)m £30m (£52)m >(100)%
ROCE 19.6% 19.8% (20)bps (1)%
Net debt £89m £36m £53m >(100)%
higher
Resilience and financial strength
• Resilient trading performance in the first half year with performance
marginally ahead of the Board's expectations.
• Revenue down 14% to £223 million (2022: £259 million) reflecting reduced
activity levels in our residential markets. Despite this more subdued market
backdrop, selling prices remained firm.
• Adjusted EBITDA(1) was £63 million (2022: £71 million), reflecting
disciplined approach to pricing, an intense focus on cost and capacity
management, and the benefit of fixed cost absorption through inventory build.
• Continued operational and strategic progress in our diversified growth engine,
Ibstock Futures; new innovation hub in West Midlands now operational, creating
a scalable platform for growth.
• Statutory Profit before tax of £30 million (2022: £51 million) reflects
exceptional cost(1) of around £11 million arising from potential clay site
closure (including £1.5m cash cost).
• Balance sheet remains strong with leverage of 0.7x (2022: 0.3x), towards the
lower end of the target range, and period end net debt was better than our
expectations at £89 million (2022: £36 million).
• Interim dividend up 3% to 3.4 pence per share (2022: 3.3p), reflecting the
resilient trading performance and the Board's confidence in the Group's
prospects.
Investing in future growth
• Progress on all key growth projects remains on budget and schedule.
• Brick slips investments at Nostell, West Yorkshire, progressing to plan, with
automated slips line (17 million slips p.a.) to commission from the end of
2023; construction of larger slips systems factory (30 million slips p.a. from
the end of 2024) now well underway, creating a strong, diversified position in
this fast-growing product category.
● Continued development of Clay brick factory network to create low cost,
efficient and sustainable capacity in line with our medium-term growth
objectives. Redevelopment of wire cut brick factories in the West Midlands
(Atlas/Aldridge) remain on track to commission from the end of 2023. Atlas
will produce the UK's first externally verified carbon neutral brick and will
increase annual network capacity by over 100 million bricks to support our
long-term growth. The project is a 'pathfinder' for more sustainable
manufacturing processes to be scaled across the Group-wide estate on our
journey to net zero.
Against the current backdrop of reduced demand and with industry capacity
increasing in 2024, we have announced a proposal to close our higher-cost
Ravenhead wire-cut brick factory in North West England. Subject to
consultation, closure would reduce the Group's current clay brick network
capacity by around 40 million bricks.
Current trading and outlook
● While overall sales volumes were down significantly in the first half, demand
showed improvement across the period.
● Our investment in major growth projects remains on track and the Group
continues to drive strategic progress while remaining intensely focused on
managing costs and capacity, with a range of measures in place, in light of
reduced market demand.
● Balance sheet strength provides resilience and gives optionality on investment
and shareholder returns.
● While recent macroeconomic events have introduced greater uncertainty into the
outlook, we remain confident in our ability to respond to market conditions
and the Board's expectations for the full year are unchanged.
● We are confident in the medium term outlook, and remain committed to our
medium term financial targets.
Joe Hudson, Chief Executive Officer, commented:
"Our first half performance demonstrates our resilience in a subdued market
environment, with lower customer demand across both new build and RMI
segments. Our focus on customer service and commercial execution, coupled with
disciplined management of capacity and costs, has enabled us to deliver a
result marginally ahead of our expectations, despite more challenging trading
conditions.
"We have continued to make strong progress with our strategic investment plans
that will underpin Ibstock's future growth and enhance our industry leadership
position. By focusing on expansion, diversification and innovation we are
building new capabilities in faster and sustainability-led growth segments of
the UK construction market.
"Although overall sales volumes were down significantly in the first half,
demand showed improvement across the period. Whilst recent macroeconomic
developments have created increased uncertainty in the outlook, having
performed marginally ahead of our expectations during the first half we remain
confident in our ability to respond to market conditions in the balance of the
year and the Board's expectations for the full year are unchanged."
Results presentation
Ibstock is holding a presentation at 10.30am 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 and Q&A is also available. Please
register here
(https://stream.brrmedia.co.uk/broadcast/6486ec4f14ad7cf0e7cd720d) for the
live webcast.
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-Wide: +44 (0) 33 0551 0200
UK Toll Free: 0808 109 0700
US +1 786 697 3501
Confirmation code: please quote Ibstock Half Year Results when prompted
An archived version of today's webcast analyst presentation will be available
on www.ibstock.co.uk
(https://www.ibstock.co.uk/investors/reports-and-presentations) 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 a diverse range of building
products and solutions. The Group concentrates on eight core product
categories, each backed up by design and technical services capabilities:
- Bricks and Masonry, Façade Systems, Roofing, Flooring and Lintels,
Staircase and Lift Shafts, Fencing and Landscaping, Retaining Walls and Rail
and Infrastructure.
The Group comprises two core business divisions, Ibstock Clay and Ibstock
Concrete. The Ibstock Futures business was established in 2021 to accelerate
growth in new, fast developing segments of the UK construction market and,
while it remains in its initial growth phase, forms part of the Clay division.
Ibstock Clay: The leading manufacturer by volume of clay bricks sold in the
United Kingdom. With 16 manufacturing sites, Ibstock Clay has the largest
brick production capacity in the UK. It operates a network of 18 active
quarries located close to its manufacturing plants. Ibstock Kevington provides
masonry and prefabricated component building solutions, operating from 6
sites.
Ibstock Concrete: A leading manufacturer of concrete roofing, walling,
flooring and fencing products, along with lintels and rail &
infrastructure products. The concrete division operates from 14 manufacturing
sites across the UK.
Ibstock Futures: Complements the core business divisions by accelerating
diversified growth opportunities which address key construction trends,
including sustainability and the shift towards Modern Methods of Construction
(MMC). Operating from an innovation hub in the West Midlands, and the Nostell
redevelopment in West Yorkshire.
Ibstock is headquartered in the village of Ibstock, Leicestershire, with 37
active manufacturing sites across the UK.
As a leading building products manufacturer, the Group is committed to the
highest levels of corporate responsibility. The ESG 2030 Strategy sets out a
clear path to address climate change, improve lives and manufacture materials
for life, with an ambitious commitment to reduce carbon emissions by 40% by
2030 and become a net zero operation by 2040.
Further information can be found at www.ibstock.co.uk
(http://www.ibstock.co.uk/)
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.
CEO Review
Introduction
I am pleased to report a resilient performance for the first half of 2023,
demonstrating the significant progress we have made over recent years to
improve the quality of our assets, processes and teams. While customer demand
improved across the period, trading conditions remained subdued and, against
this backdrop, to deliver a performance marginally ahead of our expectations
is a real testament to the strength of our business and our people.
At the halfway point of the year, we have seen a significant change in the UK
macroeconomic outlook, with near-term expectations for both inflation and
interest rates above the levels previously envisaged. Inevitably, this has
created a more uncertain trading environment for customers in both our
residential new build and RMI markets.
As we have done previously during periods of challenging trading, we have
taken decisive action to reduce costs across the business; this includes the
difficult decision to propose the closure of our Ravenhead brick factory. We
remain vigilant on costs and, as we have demonstrated in the recent past, will
continue to take any further action necessary to ensure capacity is aligned
with market demand, to protect the performance of the business.
While operating the business in a focused and disciplined manner, reflecting
market conditions in the short term, we have continued to make strong progress
with the strategic plans that will underpin Ibstock's growth and enhance our
industry leadership position. The projects to redevelop our Atlas and Aldridge
wire-cut brick manufacturing factories in the West Midlands and to invest in
brick slips manufacturing capacity at Nostell are all on track, with momentum
building as they move towards the production phase.
During the first half we also fully commissioned our new Ibstock Futures
innovation hub, with activity starting to build, as well as continuing to make
good progress with our plans to capture the significant growth opportunity in
the development of sustainable building materials.
The first half marked a significant milestone as we launched a new, powerful
"One Ibstock" brand, alongside a new set of digital tools, to make it easier
than ever for our customers to access our full range of building products,
solutions and expertise in one place.
The fundamental drivers underpinning medium term demand in our markets remain
firmly in place, and we are building new capabilities in both the conventional
and diversified segments of the UK construction markets. Our organic
investment projects support our growth ambitions and underpin our conviction
in our medium term financial targets. We remain excited by their potential.
As we trade through this more challenging period, we do so from a position of
financial strength, with leverage towards the lower end of our target range,
leaving the Group in a strong position, both to invest further for growth, and
return additional capital to shareholders into the future.
Financial performance
The Group delivered a resilient trading performance in the first half year,
against a more subdued market backdrop, and achieved a result marginally ahead
of the Board's expectations.
Revenue declined 14% year on year to £223 million (2022: £259 million),
reflecting a significant reduction in sales volumes. This was particularly
evident across our residential product categories where we experienced a
decline in line with the domestic market, both in the new build and RMI
segments. Non-residential product sales volumes held up well with
infrastructure revenues up by around 15% compared to 2022. The overall decline
in sales volumes was partly offset by a year on year pricing benefit,
reflecting the timing of inflationary increases as the Group passed through
significant increases in input costs during the 2022 year.
While cost inflation remained a feature of the first half environment, the
pace of increase was below the levels experienced in 2022. Selling prices were
substantially maintained at the levels in place at the start of 2023.
Good operational performance, the benefit of fixed cost absorption as
inventories increased, and an intense focus on cost and capacity management
mitigated the impact of lower revenue and enabled a solid performance, with
adjusted EBITDA(1) of £63 million, down 11% year on year (2022: £71
million). Adjusted EBITDA margins(1) of 28.2% (2022: 27.3%) reflected this
strong operational performance and also benefited from property gains of
around £1.5 million recognised during the second quarter.
Profit before tax of £30 million (2022: £51 million) included an exceptional
cost(1) of around £11 million arising from potential clay site closure, of
which £1.5 million is a cash cost.
Our balance sheet remains strong with period-end leverage of 0.7x net debt to
adjusted EBITDA(1), towards the lower end of our 0.5x to 1.5x target range,
despite continued investment across the business, including £24 million
invested in growth projects.
In light of the resilient performance of the business, the Board has declared
an interim dividend of 3.4p per share, representing an increase of 3% (2022:
3.3p). In declaring this level of dividend, the Board remains mindful of its
objective to deliver a sustainable and progressive ordinary dividend over
time.
Divisional review
Ibstock Clay
Once again, good operational performance supported a solid result from the
clay division, with this outcome underpinned by consistent network reliability
and an intense focus on cost management.
The division delivered a robust performance in the first half, despite the
impact of materially lower year on year sales volumes. While revenues reduced
significantly, down 13% to £162 million (2022: £186 million), strong
operational performance and good fixed cost absorption mitigated the impact of
lower sales on adjusted EBITDA(1), which totalled £57 million, down 11% from
the prior year (2022: £64 million).
Sales volumes in the period were in line with the trend experienced across the
broader domestic market2. As a consequence of this lower demand, inventory was
built at higher-than-typical levels for the first half of the year providing a
benefit to margins through higher fixed cost absorption. In the second half of
the year, we expect finished goods inventories to stabilise, and therefore do
not expect this benefit to recur.
As expected, brick imports reduced at a faster rate than domestic supply to
22% of total market (2022: 24%), a reduction of over 40% year on year, as the
UK industry was able to displace imported product. Our ability to fulfil this
demand was supported by our available capacity and strengthened inventory
position.
The division experienced meaningful cost inflation compared to the equivalent
period in 2022 in both variable and fixed cost categories. Variable costs
increased, including the impact of energy hedges entered into in the prior
year, although softer spot prices during the first half helped to limit the
scale of this increase. We now have around 85% of energy requirements covered
for the second half of the 2023 year, at prices slightly above the comparative
period.
For 2024, around a third of requirements are currently covered, with cover
weighted towards the early part of the year.
The division retained its focus on strong commercial execution and providing
high standards of service for our customers. Our On-Time, In-Full ("OTIF")
service levels continued to improve, and our enhanced scheduling capabilities
supported a reduction in customer cancellation rates.
We are making good progress in the final stages of development of our Atlas
and Aldridge brick manufacturing facilities, with the substantial majority of
capital now invested and both projects on track to commission from the end of
the 2023 year.
Ibstock Futures
Revenues at Ibstock Futures ("Futures"), which are reported in the Clay
segment, totalled £6 million in the first half of the year3, as the business
began to benefit from enhanced operational and commercial disciplines. The
trading businesses within Futures delivered an adjusted EBITDA(1) in line with
our expectations. As Futures scales, we continue to expect £5 million of
operational costs to be invested in innovation and building capability in the
current year, with around £2 million recognised in the first half.
Whilst Futures experienced a more cautious demand backdrop, in line with the
core business, the levels of market activity proved relatively more resilient,
and we believe that our customers in this segment value both the financial
strength and industry expertise of a company such as Ibstock.
In the period, we were pleased to consolidate our new Futures businesses on a
single site at Power Park, our innovation hub in the West Midlands. The hub,
which saw its first operations commence during the period will, over time,
become a state-of-the-art facility. Secured under a long-term lease, the
Innovation Hub creates a scalable platform for the growth of Futures in the
years ahead.
The brick slips market continues to build, and our investments in capacity
expansion remain on track. The development of our Nostell facility, in West
Yorkshire, is progressing well and we expect the first phase, a new automated
slips line, which will deliver up to 17 million slips per annum, to commission
towards the end of the second half. The development of the larger brick slips
systems factory, which will initially deliver a further 30 million slips per
annum, is also well underway, with equipment orders placed and contracts with
OEMs well progressed. The factory is on track to commission by the end of
2024. Combined, this significant growth in slips capacity will create a strong
and diversified position for Ibstock in this fast-growing and attractive
product category.
We continue to see a strong pipeline of opportunities to grow Futures, both
organically and by acquisition, representing a significant opportunity for
value creation as we selectively expand and diversify our product offering
further over the medium term.
Ibstock Concrete
The breadth of the concrete division's end-market exposure supported the
delivery of a good performance in the first half of the year. Revenue
reduced by 17% to £61 million (2022: £74 million), reflecting a material
decline in sales volumes within our residential product categories.
A strong performance from the rail and infrastructure category and good
operational performance across the divisional factory network helped mitigate
the impact of lower residential sales on the division's financial performance.
Adjusted EBITDA(1) was £11 million, broadly in line with the comparative
period, (2022: £11 million) as a stronger performance within infrastructure
and the benefit of fixed cost absorption underpinned a solid improvement in
adjusted EBITDA(1) margins to 17.9% (2022: 15.3%).
Towards the end of the period, we completed a small bolt-on asset acquisition
in our infrastructure business, acquiring the trade and assets of G-Tech, an
innovative designer and supplier of concrete railway platform solutions, to
expand our differentiated proposition in the railway infrastructure market.
G-Tech's concrete platform copers reduce embodied carbon by 80%, compared with
typical reductions of 30-40% achieved by competing solutions. The acquisition
represents a further strategic step in broadening our rail and infrastructure
offering.
Strategic update
Our strategy is to enhance our existing business while investing for growth in
both our core and diversified construction markets. We are focused on three
strategic priorities to Sustain, Innovate and Grow, with our ambitious ESG
goals embedded across all three. Progress in each area is outlined below.
Sustain
As a scale industrial business, sustainable high performance is at the heart
of what we do. We are focused on three priority areas: health, safety and
wellbeing; operational excellence; and environmental performance.
Health, safety and wellbeing
We remain focused on creating a positive, proactive safety culture underpinned
by a belief that all incidents across our operations are preventable. Our
further progress in the period was reflected in the 55% reduction in Lost Time
Injury Frequency Rates (LTIFR) from the 2016 baseline. This was achieved
through continued focus on our six safety rules; successful employee
engagement events such as Safe Start days; and continuing investment in
wellbeing with the introduction of a network of mental health allies.
We remain committed to driving our business to zero harm for everyone.
Operational excellence
The reduction in market demand has required a keen focus on cost and capacity
management and we have taken decisive steps to mitigate the impact on our
business performance in the short term and position the business for longer
term sustainable growth. Actions have included temporary redeployment of
colleagues towards sustaining and maintenance activities, discretionary
spending freezes and headcount reductions. At the end of June 2023, we took
the difficult but necessary decision to announce proposals to cease production
at our Ravenhead brick factory. Subject to consultation, the closure of this
wire cut brick factory in the North West of England will reduce our current
network capacity by around 40 million bricks. Moving forwards, we remain
committed to taking any further actions necessary to ensure capacity is
aligned to market demand.
Environmental performance
We continue to take action at all levels in our business to deliver our
ambitious target of a 40% reduction in carbon by 2030, and are pleased to
receive further external recognition for the leadership role we are playing in
ESG.
During the first half we completed a pilot project to fire bricks using
synthetic gas derived from waste and are in discussions with our strategic
partner to commission these assets at one of our brick factories. Our first
'pathfinder' factory at Atlas which will produce bricks with around 50% less
embodied carbon than the original factory, is on track to commission from the
end of the 2023 year. We were pleased to receive funding from the government's
Industrial Energy Transformation Fund to support a major sustainability
investment at our Laybrook brick factory in West Sussex, which we estimate
will deliver a reduction in carbon emissions of more than 15%.
It is this continuous focus, and the combined benefit from incremental actions
across the business, which moves us forward towards our target.
Innovate
Product innovation
As market leader in clay and concrete products, we have the broadest range of
building products and solutions available in the UK, and we continue to invest
to enhance our offer.
In order to strengthen our proposition targeted at displacing imported
products, we launched a number of higher-end speciality bricks during the
period, including the new "Rosa Blanca" range, which has received a very
positive reaction from customers.
Within concrete, we are rolling out our professional range of residential
landscaping products, which offer increased functionality and industry-leading
levels of embodied carbon. Within our rail and infrastructure category, our
range of lower-carbon cable troughing products has enabled us to win new
business serving the major HS2 infrastructure project.
Customer experience - launch of "One Ibstock" brand
Providing the highest standard of products and service to our customers is
critical to our success. Increasingly, our customers are looking for
integrated solutions, rather than single products.
Although we are well-known as the UK's largest brick manufacturer, Ibstock's
capabilities extend far beyond this core offer. From Roofing to Flooring,
Retaining Walls to Façade Systems, Fencing and Landscaping to Rail,
Infrastructure and more, the Group offers a diverse range of building
products, solutions and expert technical and design services. There is a clear
opportunity to leverage the breadth of our offering and win a greater
proportion of our customers' total business, supporting overall performance
and driving growth across our product platforms.
The "One Ibstock" initiative aligns our commercial teams more closely within a
single framework and deploys enhanced digital tools to make it quicker and
easier for customers to source more of their product needs in one place.
This is an important development for Ibstock, and we expect to deliver
incremental growth from this new approach over time.
Digital transformation
The digitisation of our business is a key strategic enabler as we begin to
drive an increasing proportion of our sales activities through digital
channels. During the first half we successfully piloted our online customer
portal with a small number of our builders' merchant customers, and expect to
scale this activity during the second half of the year.
Grow
Clay - Atlas and Aldridge investments
We continue to invest in our brick manufacturing network in line with our
objective of maintaining the lowest cost, most efficient and most sustainable
capacity in the industry. This approach is exemplified by the redevelopment of
our Atlas plant in the West Midlands, with the project on track to commission
from the end of 2023. As well as increasing our clay brick capacity by over
100 million bricks, Atlas will produce the UK's first certified carbon neutral
brick. Atlas has also been selected as our first 'pathfinder' factory,
piloting new, more sustainable production technologies and processes before
they are rolled out across our wider UK factory network.
The new Atlas factory will produce bricks with around 50% less embodied carbon
than the original factory. This will be achieved through a range of solutions
including the use of energy efficiency and heat optimisation technologies,
renewable electricity and a shift to electric mobile plant.
This is an important step on our journey to net zero, and we will continue to
trial, test and learn from new developments as we seek to further reduce
levels of carbon and other greenhouse gases in our products and processes.
The linked investment at our Aldridge factory, focused on commissioning new
driers and packaging equipment, is also on track to complete by the end of
this year.
The cumulative capital invested across these wire-cut development projects up
to 30 June 2023 totalled around £55 million, with the remaining £20 million
to be invested over the next nine months.
Futures
Within Ibstock Futures, our investments in brick slip capacity in Nostell,
Yorkshire, are progressing well. The faster payback investment of £8 million
in an automated slips line, providing capacity for up to 17 million slips,
remains on track to come on stream by the end of 2023. The main slip systems
factory at Nostell, incorporating more advanced and efficient process
technology, is also progressing well, and on schedule to deliver 30 million
slips annually from the end of 2024. Together, these investments will create a
strong, diversified position in this fast-growth product category.
Concrete
Our £2 million investment in automated equipment for our walling stone
factory in Anstone, Yorkshire, remains on track to be commissioned by the end
of the year and is expected to deliver around £1 million in incremental
adjusted EBITDA(1) from 2024. We have a pipeline of further fast payback
opportunities to invest capital in our concrete business over the medium term.
People
Our people are the foundation of our business, and as an organisation we are
seeking to create a culture driven by performance and led by our values. In
June 2022, we launched our "Ibstock Story" colleague engagement initiative, to
galvanise our organisation and unite all of our people around our collective
purpose and ambitions. The initiative included an all-employee share grant,
made in September 2022, to give every colleague a direct stake in the future
success of the business. I am proud to say that this story continues to be a
strong cultural catalyst, ensuring that everyone feels valued and is clear on
the contribution they can make to our business progress and success.
Our industry-leading apprenticeship programme continues to gather momentum, as
we prepare to welcome 17 new joiners to our existing cohort of 47, ensuring
that we continue to attract and retain the best talent available, along with a
wider, more clear and compelling employer proposition. We have made further
progress in the number of employees in "earn and learn" positions, putting us
firmly on track to hit our target of 10% by 2030.
Outlook
Recent macroeconomic developments have introduced greater uncertainty into the
outlook. Against this backdrop, we are managing costs and capacity tightly to
ensure they are aligned with market conditions in the short term, while
continuing to drive progress on our strategic growth projects.
Our Atlas and Aldridge investment projects are entering the final stages of
their development and will begin commissioning from the end of 2023. Atlas
will add low cost, highly efficient and sustainable capacity to our network
and produce the UK's first carbon neutral brick. Within Ibstock Futures, our
brick slip investments at Nostell are progressing well and, once completed,
will strengthen our position in the fast-growing and attractive brick slips
market. Together these projects will make an important contribution to our
future growth and, once operating at full capacity, are expected to deliver
annualised incremental adjusted EBITDA(1) totalling over £30 million.
The strength of our balance sheet and levels of cash generation provide both
resilience in a more challenging market environment and optionality for
further investment-driven growth alongside incremental returns to
shareholders. We are well positioned to accelerate our strategic progress,
through a growing investment pipeline and have the capacity to take advantage
of any opportunities created by the current backdrop, within the framework of
our disciplined and dynamic capital allocation policy.
Notwithstanding the more cautious outlook, we remain confident in our ability
to respond to market conditions and the Board's expectations for the full year
are unchanged.
Chief Financial Officer's report
Introduction
The Group delivered a resilient financial performance in the first six months
of 2023, against a more subdued market backdrop. The effective management of
plant capacity, combined with proactive steps to reduce cost, ensured that
adjusted EBITDA margins(1) were maintained in line with the comparative period
despite significantly lower sales volumes.
With strong progress against our strategic investment plans, we deployed
around £24 million of capital investments (2022: £11 million) in the service
of future growth (over and above our sustaining capital). With our continued
strong financial position, and inherently cash generative business, we expect
to generate significant further cash to support growth and shareholder returns
over the medium term.
Climate Change & TCFD
As a long-term business, a commitment to environmental sustainability and
social progress is central to our purpose. We have invested significant
capital over the last decade, with investment projects across the Group's
plant network contributing to a material reduction in the carbon intensity of
our manufacturing processes. Our ESG strategy and targets announced in 2021
provide a pathway to reduce carbon emissions by 40% by 2030, from a 2019
baseline, and be net zero carbon by 2040. We continue to actively monitor the
transitional and physical risks and opportunities of climate change through
our risk management process and ESG governance framework.
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(2) Concrete Central costs Total
£'m £'m £'m £'m
Six-month period ended 30 June 2023
Total revenue 161.7 61.1 - 222.7
Adjusted EBITDA(1) 57.4 10.9 (5.5) 62.9
Margin 35.5% 17.9% 28.2%
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%
(1) Alternative Performance Measures are described in Note 3 to the results
announcement
(2) Clay segment incorporates Futures business performance, and excludes
exceptional cost(1) of £10.7 million (2022: £0.8 million)
Due to rounding, numbers presented may not add up precisely to the totals
provided and percentages may not precisely reflect the absolute figures
Revenue
Group revenue for the six months ended 30 June 2023 decreased by 14% to
£222.7 million (2022: £259.3 million) driven by a significant reduction in
sales volumes, partly offset by a year on year pricing benefit.
In our Clay division, revenues of £161.7 million represented a decrease of
13% on the prior year period (2021: £185.5 million), resulting from
materially lower sales volumes, in line with trends experienced across the
broader domestic market2. Despite this more subdued market backdrop, selling
prices remained firm, meaning that the division achieved a price benefit
relative to the comparative period. Our Futures business contributed around
£6 million of revenue.
In our Concrete division, revenue decreased by 17% year-on-year to £61.1
million (2022: £73.8 million), with materially lower volumes within our
residential product categories, partly offset by a stronger performance from
the infrastructure business. Firm prices across the division provided a
benefit compared to the prior year period.
Adjusted EBITDA(1)
Management measures the Group's operating performance using adjusted
EBITDA(1). Adjusted EBITDA(1) decreased by 11% year on year to £62.9 million
in 2023 (2022: £70.7 million). Strong operational performance, an intense
focus on cost and capacity management and the benefit of fixed cost absorption
as inventories increased mitigated the impact of lower sales volumes. Adjusted
EBITDA(1) margins increased by 90 basis points to 28.2% (2022: 27.3%). In 2022
the Group recognised a one-off charge for a cost of living payment to
qualifying employees of around £4 million.
During the second half, we anticipate finished goods inventories to stabilise,
with adjusted EBITDA margins(1) expected to moderate as the benefit from fixed
cost absorption does not recur.
Within the Clay division, adjusted EBITDA(1) totalled £57.4 million (2022:
£64.4 million), representing an adjusted EBITDA(1) margin of 35.5% (2022:
34.7%). The modest improvement in adjusted EBITDA(1) margin reflected a
combination of strong operational performance, actions to remove fixed cost
and the benefit of overhead absorption as finished goods inventories
increased. The division recognised a net cost of £2.0 million (2022: cost of
£1.2 million) in respect of Ibstock Futures, as the acquired businesses scale
up and we continue to invest in research & development, in-house
innovation and commercial capability. The division also benefited from
property gains totalling around £1.5 million in the period.
Adjusted EBITDA(1) in our Concrete division decreased to £10.9 million (2022:
£11.3 million), as the division was impacted by materially lower sales
volumes. Adjusted EBITDA(1) margins of 17.9% were 260bps above 2022 levels
(2022: 15.3%), reflecting a mix benefit as infrastructure volumes constituted
a larger proportion of divisional activity, disciplined cost and capacity
management across the network and fixed cost absorption as inventories
increased. Performance in the prior year period was impacted by operational
challenges at our roof tile factory in Leighton Buzzard, which were remediated
in the second half of 2022.
Central costs increased to £5.5 million (2022: £5.0 million) reflecting
inflationary cost increases and a full six month charge for the all-employee
share grant which was made in H2 2022 as part of the Ibstock Story colleague
engagement initiative.
Against the more cautious outlook, we are managing costs and capacity tightly
to ensure they are aligned with market conditions in the short term, and
remain committed to taking the actions necessary to protect unit margins.
Exceptional items(1)
Based on the application of our accounting policy for exceptional items(1),
certain income and 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
£10.7 million (2022: £0.8 million cost), associated with the proposed
closure of Ravenhead as part of the single co-ordinated restructuring plan at
this site comprising:
1. An exceptional cash cost of £1.5 million relating to anticipated
redundancy costs
2. An exceptional non-cash charge of £9.2 million reflecting an asset
impairment associated with the proposed closure
Further details of exceptional items(1) are set out in Note 5 of the financial
statements.
Finance costs
Net finance costs of £2.2 million were above the level of the prior year
(2022: income of £0.1m) with a modest increase in interest cost on our RCF
borrowings, and reduced non-cash interest income on the Group's pension
assets.
Profit before taxation
Group statutory profit before taxation was £29.9 million (2022: £51.2
million), reflecting the slightly lower trading performance, as well as an
exceptional cost(1) of £10.7 million (2022: cost of £0.8 million) relating
to the proposed closure of the Ravenhead factory.
Taxation
The Group recorded a taxation charge of £7.5 million (2022: £10.4 million)
on Group pre-tax profits of £29.9 million (2022: £51.2 million), resulting
in an effective tax rate ("ETR") of 25.0% (2022: 20.3%) compared with the
blended standard rate of UK corporation tax of 23.5% (2022: 19%).
The adjusted ETR(1) (excluding the impact of the deferred tax rate change and
exceptional items) was 24.3% (2022: 17.4%).
The increase in ETR and adjusted ETR(1) from the prior year was due primarily
to a change in the standard rate of UK corporation tax to 25% in the 2023/24
tax year.
Full year adjusted ETR(1) is expected to be broadly in line with adjusted
ETR(1) for the period to 30 June 2023.
Earnings per share
Group statutory basic earnings per share (EPS) decreased to 5.7 pence in the
six months to 30 June 2023 (2022: of 10.0 pence) as a result of reduced
adjusted EBITDA(1) achieved in the period, an exceptional charge in respect of
the Ravenhead factory, and an increase in the effective tax rate.
Group adjusted basic EPS(1) of 9.0 pence per share decreased from 11.3 pence
last year, reflecting reduced adjusted EBITDA(1) and an increase in the
adjusted effective tax rate. 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
2023 2022
pence pence
Statutory basic EPS - Continuing operations 5.7 10.0
Adjusted basic EPS(1) - Continuing operations 9.0 11.3
Cash flow and net debt(1)
Adjusted operating cash flow decreased by £38 million to £11.0 million
(2022: £49.0 million), due to a modest decrease in adjusted EBITDA(1),
coupled with an increase in working capital totalling £39.5 million (2022:
£10.5 million outflow) as the Group built back finished goods inventory
levels depleted since the pandemic. The Group continued its robust management
of trade receivables, with a further reduction in DSO versus the comparative
period.
Adjusted net interest paid in the six months to 30 June 2023 increased to
£2.4 million (2022: £1.6 million) reflecting a modest increase in floating
rate borrowing. Tax payments totalled £3.4 million (2022: £0.8 million).
Other cash outflows of £6.2 million (2022: £8.0 million outflow) included
amounts totalling £1.3 million (2022: £4.0 million) in respect of carbon
emission credits purchased during the period, with the balance being
principally lease payments.
With Adjusted Operating Cash Flows(1) in the period decreasing materially from
the prior period, the cash conversion(1) percentage decreased to 18% (from 69%
in 2022), reflecting reduced adjusted EBITDA(1) and an increased investment in
working capital.
Adjusted free cash flow(1) decreased in the period to an outflow of £(21.6)
million (2022: £30.2 million inflow), as capital expenditure of £32.7
million increased by £13.9 million on 2022 (£18.8 million). The 2023 figure
comprised around £9 million of sustaining expenditure, £17 million on the
Atlas and Aldridge redevelopments and around £7 million on other growth
projects. For the full year, we continue to expect sustaining capital
expenditure to total £20 million, and growth capital expenditure to total
£55 million (comprising Atlas/Aldridge (£30 million) and other growth
projects, principally slips (£25 million).
Table 2: Cash flow (non-statutory)
2023 2022 Change
£'m £'m £'m
Adjusted EBITDA(1) 62.9 70.7 (7.9)
Adjusted change in working capital(1) (39.5) (10.5) (29.0)
Net interest (2.4) (1.6) (0.8)
Tax (3.4) (0.8) (2.6)
Post-employment benefits (0.3) (0.9) 0.6
Other(2) (6.2) (8.0) 1.8
Adjusted operating cash flow(1) 11.0 49.0 (38.0)
Cash conversion(1) 18% 69% (51)ppts
Total capex (32.7) (18.8) (13.9)
Adjusted free cash flow(1) (21.6) 30.2 (51.9)
(1) Alternative Performance Measures are described in Note 3 to the
consolidated financial statements.
(2) Other includes operating lease payments and emission allowance purchases
in all years.
The table above excludes cash flows relating to exceptional items(1) in both
years.
Net debt(1) (borrowings less cash) at 30 June 2023 totalled £89.1 million (31
December 2022: £45.9 million; 30 June 2022: £35.7 million). The movement
during the period reflected the investment in working capital combined with
£32.7 million of capital expenditure as the Group invested in its growth
projects.
Adjusted return on capital employed(1)
Adjusted return on capital employed(1) (adjusted ROCE) decreased to 19.6%
(2022: 19.8%) driven by a resilient 12-month profit performance on a higher
capital base. The increase in capital employed compared to the comparative
period reflected the investment in organic growth projects as well as higher
levels of working capital.
Capital allocation
The Group's capital allocation framework remains consistent with that laid out
in 2020, with the Group committed to allocating capital in a disciplined and
dynamic 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. We are committed
to paying dividends which are sustainable and progressive, with targeted cover
of approximately 2 times underlying earnings through the cycle;
• 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.
We continue to expect to deploy significant growth capital in the business,
with a growing pipeline of both organic and inorganic opportunities. The
Board expects there to be capital 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. The potential for additional returns of capital will be kept under
active review.
Dividend
In light of the resilient performance and the Board's confidence in prospects,
the Group has declared an interim dividend of 3.4p per share (2022: 3.3p), for
payment on 15 September 2023 to shareholders on the register on 25 August
2023.
Pensions
At 30 June 2023, the defined benefit pension scheme ("the scheme") was in an
actuarial accounting surplus position of £10.5 million (31 December 2022:
surplus of £15.2 million; 30 June 2022: surplus of £56.2 million). Applying
the valuation principles set out in IAS19, at the half year end the scheme had
asset levels of £348.2 million (31 December 2022: £373.6 million; 30 June
2022: £475.1 million) against scheme liabilities of £337.7 million (31
December 2022: £358.4 million; 30 June 2022: £418.9 million).
On 20 December 2022, the Scheme completed a full buy-in transaction with a
specialist third-party provider, which represented a significant step in the
Group's continuing strategy of de-risking its pension exposure. Together with
the partial buy-in transaction in 2020, this transaction insures the
significant majority of the Group's defined benefit liabilities.
The decrease in balance sheet surplus over the period is primarily due to
asset performance which has been largely offset by a significant actuarial
gain arising on the liabilities from a change in market conditions,
particularly the rise in corporate bond yields.
In light of the fact that the pension scheme was in a net surplus position
after the full buy-in, the Trustees and the Group agreed that the Group would
suspend paying contributions with effect from 1 March 2023.
Related party transactions
Related party transactions are disclosed in Note 15 to the consolidated
financial statements. During the current and prior year, there have been no
material related party transactions.
Subsequent events
Except for the proposed ordinary dividend, no further subsequent events
requiring either disclosure or adjustment to these financial statements have
arisen since the balance sheet date.
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 mean it is exposed to a variety of risks and
uncertainties which could, either separately or in combination, have a
material impact on the Group's performance and shareholder returns. These
risks and uncertainties relate to: 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 2022, a copy of which is available on the Group's
corporate website, www.ibstock.co.uk (http://www.ibstock.co.uk) .
The Group continues to be exposed to unfavourable macroeconomic conditions and
uncertainty which has resulted in higher interest rates and inflation, and the
possibility of a prolonged slow-down in UK residential construction markets.
These areas impact a number of the Group's principal risks including market
uncertainty, anticipating product demand, maintaining customer relationships,
people and talent management and financial risk management which includes
energy price volatility.
The Board has concluded that with clear mitigations and actions to address
these risks and Group's strong and decisive commercial and operational
execution, the Group's existing principal risks and uncertainties remain
unchanged from those set out in its 2022 Annual Report.
A full report on the Group's principal risks will be included with the FY 2023
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
market uncertainty, anticipating product demand, maintaining customer
relationships, people and talent management and financial risk management,
alongside major project delivery.
Statement of directors' responsibilities in relation to the half-yearly
financial report
The directors confirm that to the best of their 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 DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R, namely:
a) the condensed set of financial statements gives a true and fair view of the
assets, liabilities, financial position, cash flows and profit or loss of the
issuer, or undertakings included in the consolidation;
an indication of important events that have occurred during the first six
months and their impact on the condensed set of financial statements, and a
b) description of the principal risks and uncertainties for the remaining six
months of the financial year; and
material related party transactions in the first six months and any material
changes in the related party transactions described in the last annual report.
c)
By order of the Board:
Joe Hudson Chris McLeish
Chief Executive Officer Chief Financial Officer
1 August 2023 1 August 2023
Condensed consolidated income statement
for the six months ended 30 June 2023
Unaudited Unaudited Audited
Notes Half year ended 30/06/2023 Half year ended 30/06/2022 Year
ended 31/12/2022
£'000 £'000 £'000
Revenue 4 222,732 259,313 512,886
Cost of sales (150,920) (159,484) (316,521)
Gross profit 71,812 99,829 196,365
Distribution costs (19,734) (26,065) (47,961)
Administrative expenses (23,278) (23,744) (49,624)
Total profit/(loss) on disposal of property, plant and equipment 1,393 (73) 6,541
Other income 2,207 1,353 2,630
Other expenses (345) (195) (524)
Operating profit 32,055 51,105 107,427
Finance costs (3,007) (1,853) (4,553)
Finance income 827 1,971 1,890
Net finance (cost)/income (2,180) 118 (2,663)
Profit before taxation 29,875 51,223 104,764
Taxation 6 (7,479) (10,415) (17,884)
Profit for the financial period 22,396 40,808 86,880
Profit attributable to:
Owners of the parent 22,397 40,808 86,908
Non-controlling interest (1) - (28)
Notes pence per share pence per share pence per share
Earnings per share
Basic 7 5.7 10.0 21.6
Diluted 7 5.7 10.0 21.5
Non-GAAP measure
Reconciliation of adjusted EBITDA(1) to Operating profit for the financial
period:
Unaudited Unaudited Audited
Notes Half year ended 30/06/2023 Half year ended 30/06/2022 Year ended 31/12/2022
Operating profit 32,055 51,105 107,427
Add back/(less) exceptional costs/(credit) impacting operating profit 5 10,728 756 (6,278)
Add back depreciation and amortisation 20,082 18,882 38,518
Adjusted EBITDA(1) 62,865 70,743 139,667
(1) Alternative performance measures are described in Note 3 to the interim
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes Unaudited Unaudited Audited
Half year ended 30/06/2023 Half year ended 30/06/2022 Year ended 31/12/2022
£'000 £'000 £'000
Profit for the financial period 22,396 40,808 86,880
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to profit or loss
Change in fair value of cash flow hedges(1) 11 (666) 468 641
Realised fair value losses transferred to property, plant and equipment(1) - 14 -
Related tax movements(1) 166 (51) (149)
(500) 431 492
Items that will not be reclassified to profit or loss
Remeasurement of post employment benefit assets and obligations(2) 12 (4,917) (2,543) (44,581)
Related tax movements(3) 1,113 637 11,147
(3,804) (1,906) (33,434)
Other comprehensive expense for the period net of tax (4,304) (1,475) (32,942)
Total comprehensive income for the period, net of tax 18,092 39,333 53,938
Total comprehensive income attributable to:
Owners of the parent 18,093 39,333 53,966
Non-controlling interest (1) - (28)
(1) Impacting the cash flow hedging reserve.
(2) Impacting retained earnings.
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
Notes 30/06/2023 30/06/2022 31/12/2022
£'000 £'000 £'000
Assets
Non-current assets
Intangible assets 84,762 91,264 90,242
Property, plant and equipment 424,035 383,928 409,091
Right-of-use assets 39,475 26,479 31,478
Derivative financial instruments 11 - 130 116
Post-employment benefit asset 12 10,488 56,219 15,194
558,760 558,020 546,121
Current assets
Inventories 112,144 78,049 94,275
Trade and other receivables 76,341 93,383 65,935
Current tax receivable 869 111 1,717
Derivative financial instruments 11 - 278 451
Cash and cash equivalents 24,096 64,517 54,283
213,450 236,338 216,661
Assets held for sale 200 875 -
Total assets 772,410 795,233 762,782
Current liabilities
Trade and other payables (107,875) (124,583) (120,003)
Borrowings 8 (13,422) (424) (436)
Lease liabilities (7,884) (6,701) (7,690)
Derivative financial instruments 11 (99) - -
Provisions (2,535) (1,209) (1,613)
(131,815) (132,917) (129,742)
Net current assets 81,835 104,296 86,919
Total assets less current liabilities 640,595 662,316 633,040
Non-current liabilities
Borrowings 8 (99,784) (99,753) (99,769)
Lease liabilities (33,330) (21,297) (25,414)
Deferred tax liabilities (85,495) (97,466) (84,349)
Provisions (7,732) (7,008) (7,299)
(226,341) (225,524) (216,831)
Total liabilities (358,156) (358,441) (346,573)
Net assets 414,254 436,792 416,209
Equity
Share capital 4,096 4,096 4,096
Share premium 4,458 4,458 4,458
Retained earnings 806,141 804,942 807,894
Other reserves 14 (400,491) (376,704) (400,290)
Equity attributable to owners of the company 414,204 436,792 416,158
Non-controlling interest 50 - 51
Total equity 414,254 436,792 416,209
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Retained earnings Other reserves (see Note 14) Total equity attributable to owners Non-controlling interest Total Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2023 4,096 4,458 807,894 (400,290) 416,158 51 416,209
Profit/(loss) for the period - - 22,397 - 22,397 (1) 22,396
Other comprehensive expense - - (3,804) (500) (4,304) - (4,304)
Total comprehensive Income/(expenses) for the period - - 18,593 (500) 18,093 (1) 18,092
Transactions with owners:
Share based payments - - 1,432 - 1,432 - 1,432
Deferred tax on share based payments - - 87 - 87 - 87
Equity dividends paid - - (21,566) - (21,566) - (21,566)
Issue of own shares held on exercise of share options - - (299) 299 - - -
At 30 June 2023 (unaudited) 4,096 4,458 806,141 (400,491) 414,204 50 414,254
Balance at 1 January 2022 4,096 4,458 785,609 (370,934) 423,229 - 423,229
Profit for the period - - 40,808 - 40,808 - 40,808
Other comprehensive (expense)/income - - (1,906) 431 (1,475) - (1,475)
Total comprehensive income for the period - - 38,902 431 39,333 - 39,333
Transactions with owners:
Share based payments - - 857 - 857 - 857
Deferred tax on share based payments - - 109 - 109 - 109
Equity dividends paid - - (20,438) - (20,438) - (20,438)
Purchase of own shares - - - (6,298) (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 - 436,792
Balance at 1 July 2022 4,096 4,458 804,942 (376,704) 436,792 - 436,792
Profit for the period - - 46,100 - 46,100 (28) 46,072
Other comprehensive (expenses)/income - - (31,528) 61 (31,467) - (31,467)
Total comprehensive income/(expenses) for the period - - 14,572 61 14,633 (28) 14,605
Transactions with owners:
Share based payments - - 1,690 - 1,690 - 1,690
Current tax on share based payment - - 1 - 1 - 1
Deferred tax on share based payments - - 7 - 7 - 7
Equity dividends paid - - (13,263) - (13,263) - (13,263)
Purchase of own shares - - - (23,702) (23,702) - (23,702)
Issue of own shares held on exercise of share options - - (55) 55 - - -
Acquisition on subsidiary non-controlling interest - - - - - 79 79
At 31 December 2022 (audited) 4,096 4,458 807,894 (400,290) 416,158 51 416,209
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
Half year ended 30/06/2023 Half year ended 30/06/2022 Year ended 31/12/2022
£'000 £'000 £'000
Cash flow from operating activities
Cash generated from operations (Note 10) 22,178 59,544 137,765
Interest paid (1,675) (1,345) (2,888)
Other interest paid - lease liabilities (884) (234) (1,274)
Tax paid (3,369) (768) (11,699)
Net cash inflow from operating activities 16,250 57,197 121,904
Cash flows from investing activities
Purchase of property, plant and equipment (32,667) (18,769) (58,354)
Proceeds from sale of property, plant and equipment 342 8 50
Proceeds from sale of property, plant and equipment - exceptional - - 7,833
Purchase of intangible assets (1,908) (4,013) (5,573)
Payment for acquisition of subsidiary, net of cash acquired - - (959)
Interest receivable 151 - 124
Net cash outflow from investing activities (34,082) (22,774) (56,879)
Cash flows from financing activities
Dividends paid (21,566) (20,438) (33,701)
Drawdown of borrowings 13,000 - -
Debt issue costs - - (259)
Repayment of lease liabilities (3,790) (4,564) (8,010)
Cash outflow from purchase of shares - (6,099) (30,000)
Net cash outflow from financing activities (12,356) (31,101) (71,970)
Net (decrease)/increase in cash and cash equivalents (30,188) 3,322 (6,945)
Cash and cash equivalents at beginning of the year 54,283 61,199 61,199
Exchange gains/(losses) on cash and cash equivalents 1 (4) 29
Cash and cash equivalents at end of the period 24,096 64,517 54,283
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 2023 were authorised for issue in accordance with a
resolution of the Directors on 1 August 2023. 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 year ended 31
December 2022, which have been extracted from the statutory accounts for that
year, are not the Company's statutory accounts for that financial year.
Statutory accounts for the year ended 31 December 2022 were approved by the
Board of Directors on 7 March 2023. 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 2023 have been prepared in accordance with UK-adopted
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 2022, 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 2022, 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:
• Amendment to IAS 1 - Classification of liabilities as current or
non-current;
• Amendment to IAS 1 and IFRS Practice statement 2 - Disclosure of
accounting policies;
• Amendments to IAS8 - Definition of accounting estimates; and
• Amendments to IFRS 17 - Insurance contracts.
The adoption of the standards and interpretations listed above has not led to
any changes to the Group's accounting policies or had any other material
impact on the financial position or performance of 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 2022. 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 12) are still considered critical to the
preparation of the interim financial statements for the period ended 30 June
2023.
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 assessment
period extends to December 2024. 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 (including
climate change) faced by the Group, particularly those relating to economic
conditions and operational disruption.
Group forecasts have been prepared which reflect both actual conditions and
estimates of the future reflecting macroeconomic and industry-wide
projections, as well as matters specific to the Group.
During the final quarter of the 2021 year, the Group completed the refinancing
of its March 2023 £215 million Revolving Credit Facility (RCF), replacing the
existing facility with the issuance of £100 million of private placement
notes with maturities of between 7 and 12 years and a £125 million RCF for an
initial four year tenor, with a one year extension option. In addition, in the
final quarter of 2022, the Group enacted a one-year extension of the £125
million RCF, extending maturity to November 2026 on similar terms to the
original agreement. At 30 June 2023, £13 million of the RCF was drawn down.
Covenants under the Group's RCF and private placement notes require leverage
of no more than 3 times net debt to adjusted EBITDA, 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 2023, 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 that 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 most
severe but plausible scenario Clay and Concrete revenues are projected to be
around 30% lower in the second half of 2023 than 2022, recovering to around
25% lower revenues in Clay and 10% lower revenues in Concrete in 2024 versus
2022.
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 revenue reduction in both Clay and Concrete products of
84% in the second half of 2023, 47% in Clay and 24% in Concrete during the
cumulative period up to the first half of 2024, and 44% and 22% respectively
during the cumulative period up 31 December 2024, 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 annual adjusted EBITDA being in excess of 56%.
The Directors consider this to be a 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 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 are outlined within IFRS and they may not
be comparable with similarly titled APMs used by other companies.
Exceptional items
The Group presents as exceptional at the foot of the Group's Condensed
consolidated 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 the assessment of
trends in financial performance over time.
Details of all exceptional items are disclosed in Note 5.
Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA is 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 Condensed consolidated income statement within the consolidated
financial statements. Adjusted EBITDA margin is included within Note 4.
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 in 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.
The Net debt to adjusted EBITDA ratio definition removes the operating lease
expense benefit generated from IFRS16 compared to IAS 17 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 the net debt to adjusted EBITDA ratio (also referred
to as 'leverage') is set out below:
Unaudited Unaudited Audited
12 month period ended 12 month period ended year ended
30/06/2023 30/06/2022 31/12/2022
£'000 £'000 £'000
Net debt (89,110) (35,660) (45,922)
Adjusted EBITDA 131,789 119,043 139,667
Impact of IFRS 16 (8,946) (7,834) (8,491)
Adjusted EBITDA prior to IFRS 16 122,843 111,209 131,176
Ratio of net debt to adjusted EBITDA 0.7x 0.3x 0.4x
Adjusted Return on Capital Employed (Adjusted ROCE)
Adjusted Return on Capital Employed ("Adjusted ROCE") is defined as Adjusted
earnings before interest and taxation as a proportion of the average capital
employed (defined as net debt plus equity excluding the pension surplus). The
average is calculated using the period end balance and corresponding preceding
reported period end balance (year end or interim).
The Directors disclose the Adjusted 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 Adjusted ROCE is set out below:
Unaudited Unaudited
12 month period ended 30/06/2023 12 month period ended 30/06/2022 Year ended
31 December 2022
£'000 £'000 £'000
Adjusted EBITDA 131,789 119,043 139,667
Less depreciation (32,779) (30,984) (31,579)
Less amortisation (6,939) (6,941) (6,939)
Adjusted earnings before interest and taxation 92,071 81,118 101,149
Average net debt 67,516 37,266 40,791
Average equity 415,232 430,011 426,501
Average pension (12,841) (56,987) (35,707)
Average capital employed 469,907 410,290 431,585
Adjusted ROCE 19.6% 19.8% 23.4%
Average capital employed figures are derived using the following closing
balance sheet values:
30 June 31 December 30 June 31 December
2022
2021
2023 2022
£'000 £'000 £'000 £'000
Net debt 89,110 45,922 35,660 38,872
Equity 414,254 416,209 436,792 423,229
Less: pension surplus (10,488) (15,194) (56,219) (57,754)
Capital employed 492,876 446,937 416,233 404,347
Adjusted effective tax rate
The Group presents an 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 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 30/06/2023 Half year ended 30/06/2022 31 December
2022
Statutory rate of taxation in the UK 23.5% 19.0% 19.0%
Less impact of permanent differences* 0.8% (1.4%) (0.9%)
Less impact of changes in estimates re. prior periods - (0.2%) (1.6%)
Adjusted ETR 24.3% 17.4% 16.5%
Exceptional accounting profit on PPE - - (1.4%)
Effect of higher rate applied to deferred tax 0.7% 2.9% 2.0%
Reported ETR 25.0% 20.3% 17.1%
* The impact of permanent differences primarily comprises expenses not
deductible, offset by the benefit from the UK super deduction on qualifying
capital expenditure
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 non-exceptional 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 less cash flows associated with exceptional items arising in the
period of £1.5 million (30 June 2022: adding back cash flows of £0.2
million; 31 December 2022: adding back cash flows of £0.3 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
£nil (30 June 2022: £0.4 million; 31 December 2022: £7.3 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 £5.2 million
(30 June 2022: £8.6 million; 31 December 2022: £6.8 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.
Six months ended 30 June 2023 (unaudited) Statutory Exceptional Reclassification Adjusted
£'000 £'000 £'000 £'000
Adjusted EBITDA 52,137 10,728 - 62,865
Change in working capital (38,004) (1,529) - (39,533)
Impairment charges 9,199 (9,199) - -
Net interest (2,559) - 151 (2,408)
Tax (3,369) - - (3,369)
Post-employment benefits 149 - (440) (291)
Other (1,303) - (4,916) (6,219)
Adjusted operating cash flow 16,250 - (5,205) 11,045
Cash conversion 18%
Total capex (32,667) - - (32,667)
Adjusted free cash flow (16,417) - (5,205) (21,622)
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
Year ended 31 December 2022 (audited) Statutory Exceptional Reclassification Adjusted
£'000 £'000 £'000 £'000
Adjusted EBITDA 146,115 (6,448) - 139,667
Change in working capital (2,035) 267 - (1,768)
Impairment charges 382 (382) - -
Net interest (4,162) - (135) (4,297)
Tax (11,699) - - (11,699)
Post-employment benefits (973) - (777) (1,750)
Other (5,554) (705) (5,882) (12,141)
Adjusted operating cash flow 122,074 (7,268) (6,794) 108,012
Cash conversion 77%
Total capex (58,354) - - (58,354)
Adjusted free cash flow 63,720 (7,268) (6,794) 49,658
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, as detailed below, which
is defined in Note 3. The tables, below, present revenue and adjusted EBITDA
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. Eliminations represent the removal of inter-company
balances. 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.
For all the periods presented, the activities of Ibstock Futures were managed
and reported as part of the Clay division. Consequently, the position and
performance of Ibstock Futures for all periods has been classified within the
Clay reportable segment.
Six months ended 30 June 2023
Clay Concrete Unallocated & elimination Total
£'000 £'000 £'000 £'000
Total revenue 161,660 61,072 - 222,732
Adjusted EBITDA 57,432 10,903 (5,470) 62,865
Adjusted EBITDA margin 35.5% 17.9% 28.2%
Exceptional items impacting operating profit (see Note 5) (10,728) - - (10,728)
Depreciation and amortisation pre fair value uplift (11,376) (2,534) (81) (13,991)
Incremental depreciation and amortisation following fair value uplift (3,510) (2,581) - (6,091)
Net finance costs (305) (239) (1,636) (2,180)
Profit/(loss) before tax 31,513 5,549 (7,187) 29,875
Taxation (7,479)
Profit for the period 22,396
Included within revenue for the six months period ended 30 June 2023 were
£1.1 million of bill and hold transactions in the Clay division. At 30 June
2023, £1.1 million of inventory relating to these bill and hold transactions
remained on the Clay division's premises as well as £0.2 million of prior
bill and hold sales on the Concrete division's premises. During the current
period, one customer accounted for greater than 10% of Group revenues with
£39.4 million of sales across the Clay and Concrete divisions.
Six months ended 30 June 2022
Clay Concrete Unallocated & elimination Total
£'000 £'000 £'000 £'000
Total revenue 185,532 73,781 - 259,313
Adjusted EBITDA 64,377 11,318 (4,952) 70,743
Adjusted EBITDA 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
Year ended 31 December 2022
Clay Concrete Unallocated & elimination Total
£'000 £'000 £'000 £'000
Total revenue 369,193 143,693 - 512,886
Adjusted EBITDA 126,687 23,604 (10,624) 139,667
Adjusted EBITDA margin 34.3% 16.4% 27.2%
Exceptional items impacting operating profit (see Note 5) 6,222 56 - 6,278
Depreciation and amortisation pre fair value uplift (20,659) (5,546) (187) (26,392)
Incremental depreciation and amortisation following fair value uplift (6,936) (5,190) - (12,126)
Net finance costs (366) (430) (1,867) (2,663)
Profit/(loss) before tax 104,948 12,494 (12,678) 104,764
Taxation (17,884)
Profit for the year 86,880
Clay Concrete Unallocated Total
Total segment assets £'000 £'000 £'000 £'000
At 30 June 2023 619,731 138,307 14,372 772,410
At 31 December 2022 596,769 146,553 19,460 762,782
At 30 June 2022 579,884 152,150 63,199 795,233
Clay Concrete Unallocated Total
Total segment liabilities £'000 £'000 £'000 £'000
At 30 June 2023 (186,081) (47,470) (124,605) (358,156)
At 31 December 2022 (183,079) (52,172) (111,322) (346,573)
At 30 June 2022 (178,484) (59,631) (120,326) (358,441)
5. EXCEPTIONAL ITEMS
Unaudited Unaudited
Half year ended 30/06/2023 Half year ended 30/06/2022 Year ended
31 December 2022
£'000 £'000 £'000
Exceptional cost of sales
Impairment charge - Property, plant and equipment (7,530) (554) (554)
Impairment charge - working capital (1,668) - -
Total impairment charge (9,198) (554) (554)
Redundancy costs (1,530) (202) (126)
Total exceptional cost of sales (10,728) (756) (680)
Exceptional profit on disposal of property plant and equipment - - 6,958
Exceptional items impacting operating profit (10,728) (756) 6,278
Total exceptional items (10,728) (756) 6,278
Included within the current period were the following exceptional items:
Exceptional cost of sales
Impairment charges arising in the current period related to the impairment of
non-current assets and working capital items at the Group's Ravenhead site.
Due to the materiality and non-recurring nature of the events giving rise to
them, these costs have been categorised as exceptional.
Exceptional redundancy costs relate to employees engaged in production
activities following the Group's announced restructuring activity for the
Ravenhead site in the Clay division. These costs have been categorised as
exceptional due to their materiality and the non-recurring nature of the
events giving rise to the costs.
Tax on exceptional items
In the current period, impairment charges arising on non-current assets are
not tax deductible, but give rise to a deferred tax credit in the period. The
impairment charge on current assets and redundancy costs are treated as tax
deductible in the period. The total tax credit on exceptional items is £2.6
million.
Six-month period ended 30 June 2022 and year ended 31 December 2022
Details of exceptional items included within the prior interim and full year
periods are disclosed within Note 5 of the Group's 2022 interim results and
2022 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 30/06/2023 Half year ended 30/06/2022 Year
ended
31 December 2022
(000s) (000s) (000s)
Basic weighted average number of Ordinary Shares 392,063 408,300 402,746
Effect of share incentive awards and options 3,152 611 2,010
Diluted weighted average number of Ordinary Shares 395,215 408,911 404,756
The calculation of adjusted earnings per share is a key measurement used by
management that is not defined by IFRS. The adjusted earnings per share
measures should not be viewed in isolation, but rather treated as
supplementary information.
Adjusted earnings per share figures are calculated as 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 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 calculations is as follows:
Half year ended 30/06/2023 Half year ended 30/06/2022 Year
ended
31 December2022
£'000 £000 £'000
Profit for the period attributable to the parent shareholders 22,397 40,808 86,908
Add back/(less) exceptional items (Note 5) 10,728 756 (6,278)
Less tax credit on exceptional items (2,605) (132) (453)
Add fair value adjustments 6,091 5,461 12,126
Less tax credit on fair value adjustments (1,480) (951) (2,000)
Less net non-cash interest (225) (1,703) (1,376)
Add back tax expense on non-cash interest 55 296 227
Add back impact of deferred taxation rate change 223 1,500 2,095
Adjusted profit for the period attributable to the parent shareholders 35,184 46,035 91,249
Half year ended 30/06/2023 Half year ended 30/06/2022 Year ended 31 December 2022
pence pence pence
Basic EPS on profit for the year 5.7 10.0 21.6
Diluted EPS on profit for the year 5.7 10.0 21.5
Adjusted basic EPS on profit for the year 9.0 11.3 22.7
Adjusted diluted EPS on profit for the year 8.9 11.3 22.5
8. BORROWINGS
Half year ended 30/06/2023 Half year ended 30/06/2022 31 December
2022
£'000 £'000 £'000
Current
Private Placement 324 324 436
Revolving Credit Facility 13,098 100 -
13,422 424 436
Non-current
Private Placement 99,784 99,753 99,769
Total borrowings 113,206 100,177 100,205
At 30 June 2023, the Group held £100 million of private placement notes from
Pricoa Private Capital (Pricoa), 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
with Pricoa also contains an additional uncommitted shelf facility of up to
$88.1 million (or equivalent in available currencies). The agreement contains
debt covenant requirements of leverage (net debt to adjusted EBITDA) and
interest cover (adjusted EBITDA to net finance charges) of 3 times and 4
times, respectively, tested semi-annually on 30 June and 31 December in
respect of the preceding 12-month period.
Additionally, a £125 million RCF facility is held with a syndicate of five
banks for an initial four year period ending in November 2025, which was
extended to November 2026 in the prior year. Interest is charged at a margin
(depending upon the ratio of net debt to Adjusted EBITDA) 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, 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. As at 30 June 2023 the RCF was drawn down by £13
million. As at the date of approval of these financial statements, the drawn
down amount had reduced to £8 million.
The carrying value of financial liabilities have been assessed as materially
in line with their fair values, with the exception of £100 million of private
placement notes. The fair value of these borrowings has been assessed as £83
million.
No security is currently provided over the Group's borrowings.
9. IMPAIRMENT
For tangible asset impairment testing purposes, the Group has determined that
each factory is a separate Cash Generating Unit (CGU), with the exception of
the Longley concrete sites, which are considered together as one CGU. For
intangible asset impairment testing, the Group has determined that each legal
entity is a separate CGU as this is the lowest level at which the intangible
assets can be directly attributed.
In June 2023, following announcement of the proposed cessation of production
at the Ravenhead site in the Clay division, management performed detailed
impairment testing for the carrying value of the assets associated with the
Ravenhead CGU as at 30 June 2023.
Management determined the recoverable amount based on the fair value less
costs to disposal ("FVLCTD"). This assessment falls within level 3 of the fair
value hierarchy and was based on management's judgement that the assets could
not be sold for any value, this being the assumption the recoverable amount is
most sensitive to.
Determination of FVLCTD by management reflected full impairment of all items
of plant and machinery, buildings, minerals and majority of working capital
for which management's assessment was that no alternative use, future salvage
value or disposal proceeds are expected for the impacted assets.
However, management separately applies the requirements of IAS 36 to the land
on sites owned, according to the accounting policy and concluded that the
recoverable amount for the land is expected to exceed the carrying value, and
hence these assets remain unimpaired.
This assessment of impairment resulted in the recognition of an exceptional
impairment charge of £9.2 million within cost of sales within the Group's
consolidated income statement.
The impairment of assets valued at historical cost impacted the Clay operating
segment of the Group in the current period as follows:
£million
Buildings 3.1
Mineral reserves 1.1
Plant, machinery and equipment 3.3
Working capital 1.7
Total 9.2
Detailed impairment testing was performed at 31 December 2022 with no
impairment recognised. Management performed an indicators of impairment review
for the Group's remaining CGUs at 30 June 2023 and assessed the impacts that
the macroeconomic events may have on the recoverable value of the CGUs,
compared to the assumptions applied in December 2022 impairment testing. No
indicators of impairment were identified as having arisen since 31 December
2022 warranting further detailed testing, other than those specific indicators
related to the Ravenhead CGU, for which detailed impairment testing was
performed.
10. NOTES TO THE GROUP CASHFLOW STATEMENT
Unaudited Unaudited Unaudited
Half year ended 30/06/2023 Half year ended 30/06/2022 Year ended 31 December 2022
Cash flows from operating activities £'000 £'000 £'000
Profit before taxation 29,875 51,223 104,764
Adjustments for:
Depreciation 16,613 15,413 31,579
Impairment of property plant and equipment 7,529 554 554
Impairment of working capital 1,670 - -
Amortisation of intangible assets 3,469 3,469 6,939
Finance costs 2,180 (118) 2,663
Loss/(gain) on disposal of property, plant and equipment (1,393) 73 (6,541)
Research and development expenditure credit (750) (750) (1,560)
Share based payments 1,432 857 2,547
Post-employment benefits 149 (488) (973)
Other (592) - (172)
60,182 70,233 139,800
Increase in inventory (19,539) (5,228) (21,255)
Increase in trade and other receivables (10,676) (28,642) (930)
Decrease/increase in trade and other creditors (9,193) 23,704 20,650
Decrease in provisions 1,404 (523) (500)
Cash generated from operations 22,178 59,544 137,765
11. 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 2023, 31 December 2022 and 30 June 2022, the Group's fair value
measurements were categorised as Level 2, except for quoted investments within
the Group's pension schemes (No quoted investments at 30 June 2023, £1.8
million at 31 December 2022 and £148.7 million at 30 June 2022), which were
valued as Level 1.
The Group entered into forward currency contracts as cash flow hedges to
manage its exposure to 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 2023, a liability valued at £0.1 million (31 December 2022: an
asset of £0.6 million; 30 June 2022: an asset of £0.4 million) was
recognised for these derivative financial instruments.
At 30 June 2023, 31 December 2022 and 30 June 2022, 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 and deferred pensioner
asset, which was categorised as a Level 3 valuation and uses assumptions set
out in Note 12 to align its valuation to the related liability.
At 30 June 2023, 31 December 2022 and 30 June 2022, 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, with the exception of £100
million of private placement notes. The fair value of these borrowings has
been assessed as £83 million.
12. 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 ended 30 June
2023, the opening Scheme surplus of £15.2 million decreased to a closing
surplus of £10.5 million. Analysis of the movements during the six-month
period ended 30 June 2023 was as follows:
£'000
Scheme surplus at 1 January 2023 (audited) 15,194
Administration expenses (440)
Interest income 359
Remeasurement due to:
- Change in financial assumptions 20,030
- Change in demographic assumptions 5,774
- Experience losses (7,306)
- Return on plan assets (23,415)
Company contributions 292
Scheme surplus at 30 June 2022 (unaudited) 10,488
On 20 December 2022, the Scheme completed a full buy-in transaction with a
specialist third-party provider, which represented a significant step in the
Group's continuing strategy of de-risking its pensions exposure. This
transaction, together with the partial buy-in transaction in 2020 insures the
significant majority of the Group's defined benefit liabilities. As a result,
the insured asset and the corresponding liabilities of the Scheme are assumed
to be broadly matched without exposure to interest rate, inflation risk or
longevity risk. However, there is a residual risk that the insurance premium
may be increased following a data cleanse to reflect a more accurate liability
position. If the surplus Scheme assets are insufficient to meet any additional
premium, then the company may need to pay an additional contribution into the
Scheme.
The 2022 buy-in transaction attracted a total buy-in premium of £175.6
million. The initial premium payment of £81.3 million was settled on 28
December 2022 by the transfer of certain Scheme-invested assets.
In 2023, two further premium payments totalling £74.2 million were made. The
remaining premium of £20.1million is expected to be paid by 20 December 2024,
with a present value of £18.6 million having been recognised as negative
assets against the Bespoke cash flow-drive investment and the cash and net
current assets of the scheme.
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 2022. The assumptions have been updated based on
market conditions at 30 June 2023:
Unaudited Unaudited Audited
30 June 2023 30 June 2022 31 December 2022
Per annum Per annum Per annum
Discount rate 5.25% 3.65% 4.80%
RPI inflation 3.25% 3.20% 3.20%
CPI inflation 2.65% 2.60% 2.60%
Rate of increase in pensions in payment 3.65% 3.65% 3.65%
Mortality assumptions: life expectation at age 65
For male currently aged 65 21.4 years 21.9 years 21.9 years
For female currently aged 65 24.1 years 24.5 years 24.5 years
For male currently aged 40 23.1 years 23.6 years 23.6 years
For female currently aged 40 25.9 years 26.4 years 26.4 years
In light of the fact that the pension scheme was in a net surplus position
after the full buy-in, the Trustees and the Group have agreed that the Group
would suspend paying contributions with effect from 1 March 2023.
13. BUSINESS COMBINATION
On 29 July 2022, Ibstock Building Products Limited acquired 75% of the issued
share capital of Generix Facades Limited, for total consideration of £1.1
million, of which £0.1 million was deferred to 29 July 2023.
Management has reviewed the assessment of fair values attributable to the
acquired identifiable assets and concluded that no further fair value
adjustments are required.
14. OTHER RESERVES
Cash flow hedging reserve Merger reserve Own shares held Treasury shares Total other reserves
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2023 (audited) 418 (369,119) (1,589) (30,000) (400,290)
Other comprehensive income (500) - - - (500)
Issue of own shares held on exercise of share options - - 299 - 299
At 30 June 2023 (unaudited) (82) (369,119) (1,290) (30,000) (400,491)
-
Balance at 1 January 2022 (audited) (74) (369,119) (1,741) - (370,934)
Other comprehensive expense 431 - - - 431
Purchase of own shares - - - (6,298) (6,298)
Issue of own shares held on exercise of share options - - 97 - 97
At 30 June 2022 (unaudited) 357 (369,119) (1,644) (6,298) (376,704)
-
Balance at 1 July 2022 (unaudited) 357 (369,119) (1,644) (6,298) (376,704)
Other comprehensive expense 61 - - - 61
Purchase of own shares - - - (23,702) (23,702)
Issue of own shares held on exercise of share options - - 55 - 55
At 31 December 2022 (audited) 418 (369,119) (1,589) (30,000) (400,290)
Cash flow hedging reserve
The cash flow hedging reserve records movements for effective cash flow hedges
measured at fair value. The accumulated balance in the cash flow hedging
reserve will be reclassified to the cost of the designated hedged item in a
future period.
Merger reserve
The merger reserve of £369.1 million 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.
Own shares held
The Group's holding in its own equity instruments is shown as a deduction from
shareholders' equity at cost totalling £1.3 million at 30 June 2023 (30 June
2022: £1.6 million, 31 December 2022: £1.6 million). 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.
Treasury share reserve
The Treasury share reserve represents shares acquired by the Group as part of
its share buyback programme in 2022.
Commencing 10 May 2022, the Group engaged its brokers to purchase up to £30.0
million of shares on the open market on its behalf. These shares are held by
the Group to meet future requirements of employee share based payment plans.
At 30 June 2023, the Treasury shares reserve contained 16,791,470 shares.
15. RELATED PARTY TRANSACTIONS
There were no related party transactions nor any related party balances in
either the 2023 or 2022 financial periods.
16. DIVIDENDS PAID AND PROPOSED
A final dividend for 2022 of 5.5 pence per ordinary share (2021: 5.0 pence)
was paid on 12 May 2023. The Directors have declared an interim dividend of
3.4 pence per ordinary share in respect of 2023 (2022: 3.3 pence), amounting
to a dividend of £13.3 million (2022: £13.4 million). The interim dividend
will be paid on 15 September 2023 to all shareholders on the register at
close of business on 25 August 2023.
These condensed consolidated financial statements do not reflect the 2023
interim dividend payable.
17. POST BALANCE SHEET EVENTS
Except for the proposed ordinary dividend (see Note 16), no further subsequent
events requiring either disclosure or adjustment to these financial statements
have arisen since the balance sheet date.
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 2023 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
17.
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 2023 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 (ISRE (UK) 2410). 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 2, the annual financial statements of Ibstock Plc (the
"Group") are 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
ISRE (UK) 2410; 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 company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion 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 ISRE (UK) 2410.
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
1 August 2023
(1) Alternative Performance measures are described in Note 3 to this results
announcement
(2) January - May 2023 UK domestic brick deliveries reduced by 31% compared
to the prior year (Source: Department for Business & Trade Monthly
Bulletin of Building Materials - June 2023)
(3) The current period included £1m of revenue from Generix Facades, which
was acquired in July 2022
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR KZGGRZMKGFZZRecent news on Ibstock
See all newsREG - Ibstock PLC - First Quarter Trading Update
AnnouncementREG - Ibstock PLC - Holding(s) in Company
AnnouncementREG - Ibstock PLC - Notice of AGM
AnnouncementREG - Ibstock PLC - Director/PDMR Shareholding
AnnouncementREG - Ibstock PLC - Director/PDMR Shareholding
Announcement