REG - Ibstock PLC - Interim Results
07/08/2024 07:00
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RNS Number : 4541Z Ibstock PLC 07 August 2024
Interim Results
7 August 2024
LEI: 2138003QHTNX34CN9V93
Ibstock Plc
Interim results for the six months ended 30 June 2024
Continued strategic progress; well-placed for the market recovery
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 2024.
Statutory Results
Six months ended 30 June 2024 2023 ∆ 1Y % change
Revenue £178m £223m (£45)m (20)%
Profit before taxation £12m £30m (£18)m (60)%
EPS 2.2p 5.7p (3.5)p (61)%
Interim dividend per share 1.5p 3.4p 1.9p (56)%
Adjusted Results(1)
Six months ended 30 June 2024 2023 ∆ 1Y % change
Adjusted EBITDA £38m £63m (£25)m (40)%
Adjusted EBITDA margin 21.2% 28.2% (700)bps (25)%
Adjusted EPS 3.5p 9.0p (5.5)p (61)%
Adjusted free cashflow (£15)m £(22)m +£7m +28%
ROCE 8.0% 19.6% (11.6)ppts (59)%
Net debt £138m £89m £49m (55)%
higher
Solid financial performance
• Solid first half performance against the backdrop of continued challenging
market conditions, with adjusted EBITDA(1) for the period in line with our
expectations
• Revenues reduced by 20% to £178 million (2023: £223 million) principally
resulting from lower sales volumes across the core business. Sales volumes
reflected lower market demand and our disciplined approach to pricing,
compounded by exceptionally wet weather in the early part of the period
• Statutory profit before tax of £12 million (2023: £30 million) principally
reflected lower operating profit compared to the comparative period
• Adjusted EBITDA(1) was £38 million (2023: £63 million) reflecting lower
sales volumes and the impact of the additional fixed cost carried during the
period to preserve productive capacity. The prior period saw a £10 million
benefit from the absorption of fixed costs into finished goods inventories
• Major capital investment projects now close to completion, with capacity in
place for the market recovery
• Maintained focus on cash management, with tight control of capital
expenditure, costs and working capital. Net debt(1) at 30 June 2024 was £138
million (June 2023: £89 million), representing leverage of 2.0x (2023: 0.7x)
• Interim dividend of 1.5p per share (2023: 3.4p)
Continued strong cost focus, while preserving capability
• In light of weaker market demand, the Group continued to manage costs
effectively in the period to protect in-year performance, achieving a run-rate
fixed cost reduction benefit during the first half in excess of the £20
million per annum target announced in March 2024
• These incremental actions will not compromise our ability to build back
capacity quickly as markets recover
• Having managed the balance sheet effectively through this period of market
weakness, the strong cash generation profile of the business will provide
additional scope for investment in opportunities to accelerate performance as
conditions improve
Further strategic progress as we continue to invest in our future growth
• The fundamental drivers underpinning medium-term demand in our markets remain
firmly in place, and we are building new capabilities in both conventional and
diversified markets
• Recent investments at Aldridge and Parkhouse brick factories now delivering
efficient, sustainable capacity
• Commissioning of new Atlas brick factory well advanced. Once operating at full
capacity, our upgraded clay factory network will be capable of operating at
roughly double the levels of brick output produced over the last 12 months
• Continued development of Ibstock Futures, with first phase of brick slip
investment at Nostell, West Yorkshire now largely complete
Current trading and outlook
• The new government's focus on accelerating the delivery of new housing and
infrastructure is expected to form a more positive backdrop for housing
industry supply chains and effective demand over the medium term
• We are encouraged by signs of an improving trend in sector lead indicators.
Whilst we remain cautious about the extent to which this will translate into
improvements in market demand during the latter part of the year, we expect
adjusted EBITDA for the second half of the 2024 year to be broadly in line
with the comparative period in 2023(2)
• The Group remains focused on taking action to respond to prevailing market
conditions and we will continue to manage our cost position carefully,
balancing stock levels with further investments in cost and capacity to match
market demand
• We expect second half cash flow to be positive, with reported leverage
reducing from 2.0x at 30 June 2024 towards the top end of our target range (of
0.5 times to 1.5 times) by year end. Given the inherently cash generative
nature of our business, we would expect reported leverage to revert to within
our target range thereafter.
• The Group continues to build a strong position in diversified construction
markets through Ibstock Futures, and will bring to market the first brick
slips from our Nostell factory during the second half of this year, with the
larger automated slip systems factory on track to commission by the end of
2025
• With lower cost, efficient and more sustainable capacity in place in the core
business, and with inventory levels rebuilt, the Group is well positioned to
serve customers and respond to an increase in activity as market conditions
improve.
Joe Hudson, Chief Executive Officer, commented:
"Market conditions remained challenging in the first half, as expected, with
sales volumes below those reported in the comparative period. We delivered a
solid profit performance for the period which reflected our ongoing focus on
the active management of cost and margin.
"Lead indicators point to an improving sector picture, and although we are
taking a cautious view of the extent to which this will translate into a
demand improvement in the balance of the year, we expect adjusted EBITDA for
the second half of the 2024 year to be broadly in line with the comparative
period in 2023.
"The new government's commitment to increasing the supply of new homes creates
a more positive backdrop for medium term demand, and the Group remains
well-positioned for market recovery. Our investments over the last few years
have added high quality, lower cost, efficient and more sustainable capacity
to our network and developed new capabilities for the group in diversified
construction markets, while also creating a leaner, more customer-focused
business. We believe this will be a powerful combination as market conditions
improve.
"The fundamental drivers underpinning demand in our markets are firmly in
place and our prospects remain strong, underpinned by our robust balance
sheet."
Results presentation
Ibstock is holding a presentation at 10.30 BST today at UBS, 5 Broadgate,
London EC2M 2QS.
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://brrmedia.news/IBST_HY24) 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 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
Jos Bieneman
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 14 manufacturing sites, Ibstock Clay has the largest
brick production capacity in the UK. It operates a network of 14 active
quarries located close to its manufacturing plants. Ibstock Kevington provides
masonry and prefabricated component building solutions, operating from 4
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 13 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 33
active manufacturing sites across the UK.
As a leading building products manufacturer, the Group is committed to the
highest levels of corporate responsibility. The Group's 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.
(1)Alternative performance measures are described in Note 3 to the interim
financial statements.
(2)The Group reported Adjusted EBITDA of £44 million for the 6 months ended
31 December 2023
Chief Executive's Review
Introduction
The Group delivered a solid adjusted EBITDA(1) performance for the first half,
in what remained a challenging market. In the face of a more competitive
environment in some areas of the market, the Group retained a disciplined
approach to pricing in the service of protecting margins. We continue to
believe that, as market conditions normalise, this approach will allow the
Group to achieve targeted levels of market volumes, whilst supporting our
margin and returns targets.
Despite these difficult market conditions, adjusted EBITDA(1) was in line with
our expectations, reflecting continued active management of costs and strong
commercial execution.
The Group's restructuring programme undertaken during latter part of the 2023
year resulted in the permanent closure of two clay brick factories at
Ravenhead and South Holmwood. The programme also identified temporary actions,
whereby certain other brick factories were expected to be inactive for a
meaningful proportion of the 2024 year.
With overall market demand during the first half of 2024 having been around
10% below the prior year period, we now anticipate a modest reduction in full
year 2024 market volumes compared to the prior year. In light of the weaker
volume backdrop, the Group has taken additional temporary action to flex down
the output at other factories, delivering further cost savings relative to the
levels anticipated at the beginning of the 2024 year.
While taking these measures to protect in-year performance, we have been
focused on preserving key skills and knowledge to ensure that the Group
retains the ability to build back quickly when markets recover.
As we continued to manage costs tightly, taking action where necessary to
respond to market conditions, we also continued to make good progress with the
investment projects that will underpin our future growth. Our investments in
new low cost, efficient and more sustainable brick manufacturing capacity at
our Atlas facility, and the first phase of a significant capacity expansion in
the fast-growing brick slips market at our Nostell site, are both now
substantially complete. Production at both factories will ramp up over the
course of the second half, with volumes managed according to prevailing market
conditions. This new capacity will support our medium-term growth objectives
as markets recover.
I am also pleased to report that we maintained momentum with the strategic
initiatives that will create a leaner, more customer-focused and sustainable
business for the future. Notable progress in the period included the
integration of a centralised commercial and innovation team, further steps
towards our ambitious 2030 ESG targets and our continuing cultural
transformation.
The Group retains a robust balance sheet, providing both resilience and
optionality in respect of future growth investments.
The Board has recommended an interim dividend of 1.5p per share (2023: 3.4p).
The interim dividend has been set with reference to our capital allocation
policy, which targets full year cover of approximately two times through the
cycle.
Financial Performance
Revenue was 20% lower at £178 million (2023: £223 million) (or 22% lower on
a LFL basis, adjusting for the acquisition of Coltman in late 2023),
principally reflecting lower sales volumes across the core business. Sales
volumes reflected lower market demand and our disciplined approach to pricing,
compounded by the impact of exceptionally wet weather in the first quarter.
A modest reduction in selling prices in the period was offset by reduced
variable manufacturing costs, both from procurement savings and a reduction in
unit energy costs.
In light of weaker market demand, the Group also continued to manage fixed
costs proactively in the period to protect in-year performance, achieving a
run-rate fixed cost reduction benefit during the first half in excess of the
£20 million per annum target announced in March 2024. These incremental
actions (which included flexing production, hiring freezes and further
discretionary cost reductions/deferrals) will not compromise our ability to
build back quickly as markets recover, with the Group continuing to carry an
element of fixed cost at inactive sites during the period to preserve
productive capacity for the recovery.
Adjusted EBITDA(1) was £38 million (2023: £63 million) reflecting the lower
sales volumes and the impact of additional fixed cost carried during the
period at inactive sites to preserve productive capacity for the market
recovery. The prior year period saw a £10 million benefit from the absorption
of fixed costs into finished goods inventories.
The Adjusted EBITDA margin(1) reduced to 21.2% (2023: 28.2%). Adjusted
earnings per share of 3.5 pence (2023: 9.0 pence) reflected lower operating
profit and a modest increase in the underlying effective tax rate, which was
in line with the guidance on taxation given at the start of the year.
Profit before tax of £12 million (2023: £30 million), reflected a lower
trading performance and an exceptional cost(1) of £3 million (2023: cost of
£11 million) relating to site closure activities.
The Group's balance sheet remains robust, with closing net debt(1) of £138
million at 30 June 2024 (2023: £89 million) representing leverage of 2.0x
adjusted EBITDA(1) (2023: 0.7x). The period end position was in line with our
expectations, and reflected a strong focus on cash management, with tight
control of capital expenditure, costs and working capital across the period.
The increase in net debt during the period reflected the anticipated seasonal
working capital build along with the Group's continued investment in organic
growth projects, which are now nearing completion.
Second half cash flow is expected to be positive, with reported leverage
reducing by year end towards the top end of our target range (0.5 to 1.5
times). Given the inherently cash generative nature of our business, we would
expect leverage to revert to within our target range thereafter.
Divisional Review
Ibstock Clay
The Clay Division delivered a solid performance, despite a material reduction
in sales volumes, as it benefited from strong cost management and robust
commercial discipline, as well as agile operational performance.
Revenues in the Clay Division reduced by 26% to £119 million (2023: £162
million) driven principally by a reduction in volumes, as the Group took a
disciplined approach to pricing in the service of protecting adjusted EBITDA
margins(1). Overall, average selling prices reduced modestly compared to the
comparative period, partly reflecting changes in channel and product mix.
Overall, we believe the UK brick market reduced by around 10% during the first
half of the 2024 year compared to the comparative period in 2023. Volumes of
clay bricks imported into the UK market were down by around 15% compared to
the comparative period, as they continued to reduce at a faster rate than
domestic shipments.
Adjusted EBITDA(1) reduced by 40% to £34 million (2023: £57 million),
reflecting the significant reduction in sales volumes, partly mitigated
through unit variable cost reductions and continued decisive action to reduce
fixed costs.
Adjusted EBITDA margin(1) in the clay segment remained robust at 28.6% (2023:
35.5%) despite the material reduction in sales volumes and a benefit of £8
million in the prior year period from the absorption of fixed costs into
inventory.
Ibstock Futures
We continued to make solid progress in building our Ibstock Futures business,
although activity across the key product lines was below the prior year,
reflecting the trend observed more broadly across construction markets. We
continued to build a strong platform for future growth, with our organic
investments in brick slip capacity at Nostell, West Yorkshire, progressing to
plan.
Futures delivered a profit performance modestly below the comparative period,
with revenues, which are reported in the Clay segment, totalling £4 million
(2023: £6 million), and an overall net cost (including research and
development expenditure) of £3 million (2023: £2 million).
During the period we appointed a new Managing Director of Futures, who brings
experience of the sector and strong MMC market knowledge into the business.
We continue to see a strong pipeline of opportunities to grow Futures, both
organically and by acquisition, as we expand and diversify our product
offering over the medium term to support the growth of MMC in the UK.
Ibstock Concrete
While the breadth of the Concrete Division's end-market exposure helped to
mitigate the impact of the subdued trading conditions, its results for the
period reflected weaker residential and rail market volumes. Revenue reduced
by 4% year-on-year to £59 million (2023: £61 million), or 12% on a LFL
basis, excluding the impact of Coltman Precast which was acquired during the
final quarter of 2023.
The division experienced a reduction in residential new build sales volumes in
line with the wider market, although RMI performance was stronger, supported
by firmer fencing volumes. Infrastructure sales volumes were materially lower,
with rail activity subdued as Network Rail transitioned to Control Period 7,
the next five year period of its network delivery plan, during the first half
of 2024.
The integration of Coltman, the precast flooring business, has progressed
well, and in line with our expectations. Coltman contributed revenues of £5
million in the first half, with an adjusted EBITDA margin(1) of around 5%,
after certain one-off integration costs which are not expected to recur in
2025.
Adjusted EBITDA(1) for the Concrete Division was £8 million, down 31% year on
year (2023: £11 million).
Overall, the division achieved adjusted EBITDA margins(1) of 12.7% (2023:
17.9%) as more resilient RMI volumes and strong cost management were more than
offset by the impact of lower new build residential and rail volumes. The
division also benefited from the absorption of around £2 million of fixed
costs into inventory in the comparative period.
Major projects
The fundamental drivers underpinning medium-term demand in our markets remain
firmly in place. In 2021 the Group commenced two major growth investment
projects to capitalise on the attractive fundamentals, across both its core
and new, diversified markets. These capital investments are now close to
completion, with high quality, lower-cost capacity in place which will allow
the Group to benefit from market recovery.
Core clay investments in capacity at Atlas and Aldridge
Commissioning of our new Atlas factory in the West Midlands is now well
advanced. Atlas will produce the UK's first externally verified carbon neutral
brick and, when operating at full capacity, will increase annual network
capacity by over 100 million bricks to support the Group's long-term growth
objectives. The market launch of the UK's first carbon-neutral brick is an
exciting development for the Clay Division and we look forward to shipping the
first volumes of this innovative new product during the second half of the
2024 year.
Work to upgrade the dryers and packaging equipment in the adjacent Aldridge
factory was completed during the second half of 2023 and we are already seeing
significant improvements in efficiency and reductions in energy use at the
site.
Production at both factories will ramp up over the course of the second half,
with volumes managed according to prevailing market conditions.
Diversified growth investments in brick slip capacity at Nostell, Yorkshire
Commissioning of the new automated brick slips cutting line at Nostell, West
Yorkshire is now almost complete and customer deliveries will commence
shortly. The new line provides a significant domestic supply of brick slips to
the UK market for the first time and will deliver up to 17 million slips per
annum when operating at full capacity. Customer reaction to this new
high-quality source of domestic supply has been very positive, and this
investment represents our first step towards building a scale leadership
position in this fast-growing product category.
Phase two of the Nostell redevelopment, the construction of a larger brick
slip systems factory with an initial capacity of a further 30 million slips
per annum, is progressing in line with our expectations. This project is on
track to commission by the end of the 2025 year.
Strategic update
Our operational strategy is centred on three strategic pillars of Sustain,
Innovate and Grow, with our ambitious ESG commitments embedded across all
three. An update on progress is set out below.
Sustain
As a scale industrial business, sustainable high performance is at the heart
of what we do, with activity focused on three priority areas: health, safety
and wellbeing; operational excellence; and environmental performance.
Health, safety and wellbeing
The Group remains committed to driving a step change in health, safety and
wellbeing for all colleagues, with a significant improvement in performance
being driven by a refreshed "leadership in action" programme and annual total
incident frequency rate (TIFR) targets. For 2024, we are targeting a 20%
reduction in TIFR and our performance in the year to date is on track to meet
this objective, following the introduction of a programme of daily risk
reduction measures across the Group's operations.
Operational excellence
We have invested significant capital over the last five years in enhancing the
reliability and performance of our factory networks. Despite a reduction in
production volumes during the period, the optimised factory footprint
continued to benefit from this asset enhancement programme which has delivered
both operational efficiencies and an improved environmental performance.
Specific factory improvement projects such as the major kiln rebuild at the
Parkhouse brick factory and the automation of our walling stone factory at
Anstone, near Sheffield, have strengthened our ability to build back capacity
quickly as demand recovers.
Environmental performance
Having established our high level carbon transition plan to 2030, including
the impact of key investment projects and a continued operational enhancement
programme across the factory estate, we remain on track to deliver our 2030
target. A five year Carbon Transition Plan is under development through
detailed planning at factory level, which will be fully costed and integrated
into operational plans in the months ahead.
Following successful trials on alternative fuel usage (synthetic gas &
hydrogen), we continued to complete further research and progress
conversations with potential commercial partners during the period.
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 customer offer. In 2023 the Group created a single centralised
Product, Innovation and Quality function to strengthen and accelerate its
innovation, research and new product development pipeline. We began to see
some early benefits from this new approach during the first half, with strong
progress made on the development of new thin brick products, and lower carbon
rail and fencing products.
With the commissioning of our new Atlas factory, during the second half of the
year we are also launching an exciting range of new bricks, including the UK's
first carbon neutral bricks.
Customer Experience
The unified "One Ibstock" brand identity and new commercial team structure
launched in 2023 continued to embed across the Group during the first half,
resulting in a broader range of products being offered to customers and an
increase in solution selling opportunities. We firmly believe the unrivalled
diversity of our building products offering will increasingly provide us with
a source of competitive advantage as we actively focus on a deeper
understanding of customer needs to build long term strategic partnerships.
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 period we initiated an investment in an enhanced data
platform, to improve the speed and quality of performance and market insights.
We expect to deliver this enhanced platform over the next 12 months.
Grow
Grow the core business
With work to upgrade production equipment at our Aldridge factory completed
towards the end of 2023, there has been both improvement in production yield
and reduction in carbon emissions at the site during the first half.
Our redeveloped Atlas 'pathfinder' factory is at advanced commissioning stage
and on track to ramp up production during the second half. Atlas will produce
our lowest embodied carbon bricks, with around 50% lower carbon than the
previous factory. The factory will also produce our first ever Carbon
Neutral® certified bricks as part of its range and we are excited about
making our first deliveries of this innovative new product later this year, as
we support our customers on their own emission reduction journeys.
Grow through diversification
Ibstock Futures made good operational and strategic progress during the year
as it continued to build its capabilities in new, fast-growth areas of the UK
construction market.
Phase one of the Nostell brick slips factory investment is nearing completion,
with commissioning of the new automated brick slips cutting line now almost
complete. The new line uses some first of its kind technology in the UK to
drive automation and enable the supply of domestically manufactured brick
slips at pace and scale. This represents a first significant step towards
building a significant leadership position in this fast-growing product
category. Phase two of the project - the construction of a larger brick slip
systems factory - is progressing to plan, as discussed above.
Discussions with potential partners on the commercialisation of our owned clay
reserves for the manufacture of calcined clay continued to progress well.
Culture and capability
We are passionate about establishing culture as a key point of difference
across our organisation and, notwithstanding the current challenging market
conditions and the imperative of strong cost management, the Group continued
to focus on developing its culture and preserving productive capability during
the period. Notable achievements in the period included the continued growth
of our early careers and skills agenda, which drove big increases in the
breadth of our apprentice roles and the diversity of hires, along with the
second phase of a successful talent development programme.
Conviction in the Group's medium-term prospects
The Group's confidence in its medium-term prospects is underpinned by an
expectation of a return to normalised conditions within its core markets
combined with the incremental returns generated from our significant capital
investment programme.
Total UK brick market volumes for the 12 months to June 2024 totalled 1.6
billion, down by over 35% from the level of 2.5 billion achieved in the 2022
calendar year. Against this backdrop, we have taken decisive action to manage
capacity and cost, to ensure that performance is protected, and factory output
managed according to market demand. However, given the structural undersupply
of new build housing, and the stated political intention to substantially
increase levels of residential construction, we have a strong conviction in
the full recovery of our markets over the years ahead.
Having made significant investment over recent years, we now have a lower
cost, efficient and more sustainable network available to serve the market as
conditions improve. Once at full capacity, our upgraded clay factory network
will be capable of operating at roughly double the levels of brick output
produced over the last 12 months.
Whilst we are taking a cautious view around the extent of market recovery in
the balance of the 2024 year, given the strength and scale of our business,
and our conviction in the fundamentals of our markets, we remain confident in
achieving our stated medium-term financial targets.
Outlook for 2024
Whilst we are encouraged by signs of an improving trend in sector lead
indicators, we remain cautious about the extent to which this will translate
to improvements in market demand during the latter part of the year.
With overall market demand during the first half of 2024 having been around
10% below the prior year period, we now anticipate a modest reduction in full
year 2024 market volumes compared to the prior year and expect adjusted EBITDA
for the second half of the 2024 year to be broadly in line with the
comparative period in 2023.
The Group remains focused on taking action to respond to prevailing market
conditions and we will continue to manage our cost position carefully,
balancing stock levels with further investments in cost and capacity to match
market demand.
The new government's focus on accelerating the delivery of new housing and
infrastructure is expected to form a more positive backdrop for housing
industry supply chains and effective demand over the medium term.
The Group continues to build a significant position in diversified
construction markets through Ibstock Futures and will bring to market the
first brick slips from our Nostell factory during the second half of this
year, with the larger automated slip systems factory scheduled to commission
by the end of 2025.
Ibstock's prospects remain strong, underpinned by our robust balance sheet and
well invested manufacturing network. With low cost, efficient and more
sustainable capacity in place in the core business, and with inventory levels
rebuilt, the Group is well positioned to serve customers and respond to an
increase in activity as market conditions improve.
(1)Alternative performance measures are described in Note 3 to the interim
financial statements.
Chief Financial Officer's report
Introduction
The Group delivered a solid financial performance in the first half of 2024,
against a market backdrop which continued to be challenging. The effective
management of plant capacity, combined with active management of cost and
strong commercial execution, ensured that adjusted EBITDA(1) was in line with
our expectations.
With continued strong progress against our strategic investment plans, we
deployed around £24 million of capital investment (2023: £33 million) to
drive future growth in both core and diversified construction markets. Having
managed our balance sheet effectively through the recent market weakness, the
cash generation profile of the business is expected to provide additional
scope for investment in opportunities to accelerate performance as conditions
improve.
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, profit/(loss) before tax and
adjusted EBITDA(1) for the period
Clay(2) Concrete Central costs Total
£'m £'m £'m £'m
Six-month period ended 30 June 2024
Total revenue 119.4 58.8 - 178.2
Adjusted EBITDA(1) 34.2 7.5 (4.0) 37.7
Margin 28.6% 12.7% 21.2%
Profit/(loss) before tax 15.9 1.9 (6.0) 11.8
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%
Profit/(loss) before tax 31.5 5.5 (7.2) 29.9
(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 £3.1 million (2023: £10.7 million)
Due to rounding, numbers presented may not add up precisely to the totals
provided and percentages may not precisely align to the reported figures
Revenue
Group revenue for the six months ended 30 June 2024 decreased by 20% to
£178.2 million (2023: £222.7 million) driven by a significant reduction in
market demand and our disciplined approach to pricing, compounded by
exceptionally wet weather early in the period. In the face of a more
competitive pricing environment in certain parts of the market, we retained a
disciplined approach to pricing, in the service of protecting margins.
In our Clay division, revenues of £119.4 million represented a decrease of
26% on the prior year period (2023: £161.7 million), resulting from
materially lower market demand and our disciplined approach to pricing.
Average prices in the clay division reduced modestly, in part reflecting the
impact of changes in channel and product mix. Our Futures business contributed
around £3.9 million of revenue (2023: £5.8 million).
In our Concrete division, reported revenue decreased by 4% year-on-year to
£58.8 million (2023: £61.1 million), or 12% on a like for like basis, with
our new acquisition, Coltman Precast, contributing £5.1 million of revenue in
the period (2023: £nil). On a like-for-like basis, the reduction in revenue
reflected reduced market demand in our new build residential product
categories and lower rail volumes. These impacts were partly mitigated by
stronger RMI landscaping volumes, particularly within fencing.
Adjusted EBITDA(1)
Management measures the Group's operating performance using adjusted
EBITDA(1). Adjusted EBITDA(1) decreased by 40% year on year to £37.7 million
in 2023 (2023: £62.9 million). Performance reflected the impact of lower
sales volumes and additional fixed cost carried during the period at inactive
sites to preserve productive capacity for the market recovery. The prior year
period saw a £10 million benefit from the absorption of fixed costs into
finished goods inventories.
In light of weaker market demand, the Group continued to manage costs
effectively, achieving a run rate cost reduction benefit during the first half
in excess of the £20 million per annum announced in March 2024.
Within the Clay division, adjusted EBITDA(1) totalled £34.2 million (2023:
£57.4 million), representing an adjusted EBITDA margin(1) of 28.6% (2022:
35.5%). In the core clay business, a reduction in average selling prices was
offset by lower unit variable costs, meaning that the contribution margin
percentage remained in line with the comparative period. Good fixed cost
management also enabled the division to exceed its targeted savings following
the Group's restructuring programme undertaken in the second half of the 2023
year.
The clay division recognised a net cost of £3.3 million (2023: cost of £2.0
million) in respect of Ibstock Futures, reflecting the trend observed more
broadly across construction markets. This cost continued to include a
significant level of expenditure in research and development as we invest
ahead of revenue in green energy solutions, calcined clay and other
diversified growth opportunities.
Within our Concrete division, adjusted EBITDA(1) decreased to £7.5 million
(2023: £10.9 million), as the division was impacted by materially lower sales
volumes in our new build residential and rail product categories. The division
benefited from the absorption of around £2 million of fixed costs into
inventory in the comparative period. The adjusted EBITDA margin(1) of 12.7% in
concrete was below the 2023 level of 17.9%, as strong cost management partly
mitigated the impact of lower volumes and the effect of weaker mix (as rail
and infrastructure volumes reduced as a percentage of total divisional
activity).
Central costs decreased to £4.0 million (2023: £5.5 million) principally
reflecting reduced employment and variable remuneration costs.
Looking forwards, the Group remains focused on tightly managing cost to
mitigate the impact of the current softer market backdrop.
Adjusted EBIT(1)
In order to focus on a more comprehensive measure of operating performance,
and in line with a key remuneration measure for senior management, the Group
has also started to measure and report the Group's performance using adjusted
EBIT(1). Adjusted EBIT(1) is defined as adjusted EBITDA(1) less underlying
depreciation and amortisation.
For the six months to 30 June 2024, adjusted EBIT(1) reduced to £23.1 million
(2023: £48.9 million) reflecting reduced trading profits and a modest
increase in underlying depreciation and amortisation to £14.6 million (2023:
£14.0 million) as the Group started to depreciate its Aldridge and Parkhouse
investments and recognised a full period of the Futures innovation hub lease
cost.
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
£3.2 million (2023: £10.7 million cost), associated with the Group's
restructuring programme announced in the prior year. The charge in the current
period related to decommissioning activities and other costs associated with
closed sites. The Group continues to expect to recognise exceptional costs of
around £5 million in this regard in the 2024 year as a whole.
Further details of exceptional items(1) are set out in Note 5 of the financial
statements.
Finance costs
Net finance costs of £2.7 million were above the level of the prior year
(2023: £2.2 million). This reflected an increased interest cost on our bank
borrowings as the average borrowing on our £125 million Revolving Credit
Facility (RCF) increased over the comparative period.
Profit before taxation
Group statutory profit before taxation was £11.8 million (2023: £29.9
million), reflecting the lower trading performance, as well as an exceptional
cost(1) of £3.2 million (2023: cost of £10.7 million) relating to site
closure and decommissioning activities, as detailed above.
Taxation
The Group recorded a taxation charge of £3.2 million (2022: £7.5 million) on
Group pre-tax profits of £11.8 million (2023: £29.9 million), resulting in
an effective tax rate ("ETR") of 27.1% (2023: 25.0%) compared with the
standard rate of UK corporation tax of 25.0% (2023: 23.5%).
The adjusted ETR(1) (excluding the impact of the deferred tax rate change and
exceptional items) was 26.2% (2023: 24.3%).
The increase in ETR and adjusted ETR(1) from the prior year was due primarily
to the full year impact of the change in the standard rate of UK corporation
tax to 25% enacted in the 2023/24 tax year.
We continue to expect the adjusted ETR(1) for the 2024 year to be around 26%,
in line with the rate reported in the first half.
Earnings per share
Group statutory basic earnings per share (EPS) decreased to 2.2 pence in the
six months to 30 June 2023 (2023: 5.7 pence) primarily as a result of reduced
trading performance in the period and an increase in the effective tax rate.
Group adjusted basic EPS(1) of 3.5 pence per share decreased from 9.0 pence
last year, reflecting reduced adjusted EBIT(1) and an increase in the adjusted
effective tax rate following an increase in the headline UK 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
2024 2023
pence pence
Statutory basic EPS - Continuing operations 2.2 5.7
Adjusted basic EPS(1) - Continuing operations 3.5 9.0
Cash flow and net debt(1)
Adjusted operating cash flow decreased by £2 million to £9.0 million (2023:
£11.0 million), reflecting a decrease in adjusted EBITDA(1), mitigated by a
lower working capital increase of £19.4 million (2023: increase of £39.5
million).
The working capital increase in the period reflected the typical seasonal
build in the level of trade receivables. Inventories reduced modestly during
the period as we tightly managed operational activity across the factory
network, driving a significant favourable variance to the comparative period,
as we built significant levels of finished goods inventories during the first
six months of 2023.
Adjusted net interest paid in the six months to 30 June 2024 increased to
£4.2 million (2023: £2.4 million), in line with our expectations. The
increase compared to the comparative period reflected both an increase in
average borrowings and a modest increase in interest rates on our floating
rate debt.
Tax payments totalled £0.5 million (2023: £3.4 million) as we continued to
benefit from the accelerated write down on qualifying capital expenditure.
Other cash outflows of £4.4 million (2023: £6.2 million outflow) principally
comprised lease payments. The Group purchased no carbon emission credits in
the period (2023: £1.3 million).
With Adjusted Operating Cash Flows(1) in the period decreasing marginally from
the prior period, the cash conversion(1) percentage increased to 24% (from 18%
in 2023), reflecting a reduced investment in working capital versus the prior
period.
Adjusted free cash flow(1) in the period totalled an outflow of £15.5 million
(2023: £21.6 million outflow). Capital expenditure of £24.4 million
decreased by £8.3 million compared to the comparative period (2023: £32.7
million), as major project expenditure reduced, as anticipated, and sustaining
capital continued to be tightly managed.
Capital expenditure comprised around £10 million of sustaining expenditure,
£3 million on the Atlas and Aldridge redevelopments, £1 million at Anstone
Concrete and around £10 million on the Slips programme.
For the full year, we continue to expect total capital expenditure of around
£50 million with sustaining capital expenditure of around £20 million, and
growth capital expenditure of £30 million.
Table 2: Cash flow (non-statutory)
2024 2023 Change
£'m £'m £'m
Adjusted EBITDA(1) 37.7 62.9 (25.2)
Adjusted change in working capital(1) (19.4) (39.5) 20.1
Net interest (4.2) (2.4) (1.8)
Tax (0.5) (3.4) 2.9
Post-employment benefits - (0.3) 0.3
Other(2) (4.6) (6.2) 1.6
Adjusted operating cash flow(1) 9.0 11.0 (2.0)
Cash conversion(1) 24% 18% 6ppts
Total capex (24.4) (32.7) 8.3
Adjusted free cash flow(1) (15.5) (21.6) 6.1
(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 outflows relating to exceptional items(1) of
£7.7 million in 2024 (2023: £ nil million) relating to the settlement of
severance and certain decommissioning activities arising from our 2023
restructuring programme.
Net debt(1) (borrowings less cash) at 30 June 2024 totalled £137.8 million
(31 December 2023: £100.6 million; 30 June 2023: £89.1 million). The
movement during the period reflected the seasonal increase in working capital
combined with £24.4 million of capital expenditure as the Group continued to
invest in its growth projects.
We expect cash flows in the second half to be positive, with leverage on a
reported basis (i.e. excluding the impact of IFRS 16) reducing by year end
from 2.0 times closer to the top end of the target range (being 0.5 times to
1.5 times).
The Group's borrowings contain leverage covenants of no greater than 3.0x.
Based on the covenant definition, leverage at 30 June 2024 totalled 1.7 times,
comfortably below the covenant limit. At the balance sheet date, the Group had
£80 million of undrawn committed facilities.
Adjusted return on capital employed(1)
Adjusted return on capital employed(1) (adjusted ROCE) decreased to 8.0%
(2023: 19.6%) driven by reduced adjusted EBIT(1) on a higher level of capital
employed. The increase in capital employed compared to the comparative period
principally reflected the incremental investment in organic growth projects.
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.
Dividend
The Group has declared an interim dividend of 1.5p per share (2022: 3.4p), for
payment on 13 September 2024 to shareholders on the register on 23 August
2024. The interim dividend has been set with reference to our capital
allocation policy, which targets full year cover of approximately two times
underlying earnings through the cycle.
Pensions
At 30 June 2024, the defined benefit pension scheme ("the scheme") was in an
actuarial accounting surplus position of £8.8 million (31 December 2023:
surplus of £9.8 million; 30 June 2023: surplus of £10.5 million). Applying
the valuation principles set out in IAS19, at the half year end the scheme had
asset levels of £341.4 million (31 December 2023: £373.7 million; 30 June
2023: £348.2 million) against scheme liabilities of £332.6 million (31
December 2023: £363.9 million; 30 June 2023: £337.7 million).
On 20 December 2022, the Scheme completed a full buy-in transaction with a
specialist third-party provider. Together with the partial buy-in transaction
completed with the same counterparty in 2020, this transaction insured the
significant majority of the Group's defined benefit liabilities.
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 interim 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: business continuity, regulatory and
compliance, people and talent management, cyber and information security,
health, safety and environment (HSE), economic conditions, financial risk
management, maintaining customer relationships and market reputation, climate
change, anticipating product demand and innovation 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 2023, 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 macro-economic conditions
and a prolonged slow-down in UK residential construction markets. These areas
impact a number of the Group's principal risks including economic conditions,
anticipating product demand and innovation, maintaining customer
relationships, people and talent management and financial risk management.
Having undertaken a comprehensive review during the first half of the 2024
year, the Board has concluded that the Group's existing principal risks and
uncertainties remain unchanged from those set out in its 2023 Annual Report,
and that there continue to be clear actions in place to appropriately mitigate
these risks.
A full report on the Group's principal risks will be included with the FY 2024
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
economic conditions, anticipating product demand and innovation, maintaining
customer relationships, people and talent management and financial risk
management, alongside cyber security, major project delivery and HSE.
(1)Alternative performance measures are described in Note 3 to the interim
financial statements.
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;
b) 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
description of the principal risks and uncertainties for the remaining six
months of the financial year; and
c) material related party transactions in the first six months and any material
changes in the related party transactions described in the last annual report.
By order of the Board:
Joe Hudson Chris McLeish
Chief Executive Officer Chief Financial Officer
6 August 2024 6 August 2024
Condensed consolidated income statement
for the six months ended 30 June 2024
Unaudited Unaudited Audited
Notes Half year ended Half year ended 30/06/2023 Year ended 31/12/2023
30/06/2024
£'000 £'000 £'000
Revenue 4 178,189 222,732 405,839
Cost of sales (126,833) (150,920) (290,883)
Gross profit 51,356 71,812 114,956
Distribution costs (17,112) (19,734) (36,797)
Administrative expenses (20,765) (23,278) (47,623)
Total profit on disposal of property, plant and equipment 11 1,393 1,957
Other income 1,157 2,207 3,312
Other expenses (195) (345) (774)
Operating profit 14,452 32,055 35,031
Finance costs (3,982) (3,007) (5,932)
Finance income 1,312 827 968
Net finance cost (2,670) (2,180) (4,964)
Profit before taxation 11,782 29,875 30,067
Taxation 6 (3,193) (7,479) (9,007)
Profit for the financial period 8,589 22,396 21,060
Profit attributable to:
Owners of the parent 8,589 22,397 21,060
Non-controlling interest - (1) -
Notes pence per share pence per share pence per share
Earnings per share
Basic 7 2.2 5.7 5.4
Diluted 7 2.2 5.7 5.3
Non-GAAP measure
Reconciliation of adjusted EBIT and adjusted EBITDA to Operating profit for
the financial period:
Unaudited Unaudited Audited
Notes Half year ended Half year ended 30/06/2023 Year ended 31/12/2023
30/06/2024
£000 £000 £000
Operating profit 14,452 32,055 35,031
Add back exceptional costs impacting operating profit 5 3,226 10,728 30,762
Add back incremental depreciation and amortisation following fair value uplift 4 5,390 6,091 12,126
Adjusted EBIT* 23,068 48,874 77,919
Add back depreciation and amortisation pre fair value uplift 4 14,636 13,991 29,438
Adjusted EBITDA* 37,704 62,865 107,357
( )
(*)Alternative performance measures are described in Note 3 to the interim
financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Notes Half year ended Half year ended 30/06/2023 Year ended 31/12/2023
30/06/2024
£'000 £'000 £'000
Profit for the financial period 8,589 22,396 21,060
Other comprehensive expense:
Items that may be reclassified subsequently to profit or loss
Change in fair value of cash flow hedges 11 - (666) (591)
Related tax movements - 166 148
- (500) (443)
Items that will not be reclassified to profit or loss
Remeasurement of post employment benefit assets and obligations 12 (756) (4,917) (5,283)
Related tax movements 189 1,113 1,320
(567) (3,804) (3,963)
Other comprehensive expense for the period net of tax (567) (4,304) (4,406)
Total comprehensive income for the period, net of tax 8,022 18,092 16,654
Total comprehensive income attributable to:
Owners of the parent 8,022 18,093 16,654
Non-controlling interest - (1) -
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
Notes 30/06/2024 30/06/2023 31/12/2023
£'000 £'000 £'000
Assets
Non-current assets
Intangible assets 76,284 84,762 82,017
Property, plant and equipment 453,348 424,035 440,400
Right-of-use assets 36,817 39,475 39,831
Post-employment benefit asset 12 8,771 10,488 9,832
575,220 558,760 572,080
Current assets
Inventories 116,753 112,144 119,189
Current tax receivable 2,996 869 1,171
Trade and other receivables 58,632 76,341 37,919
Cash and cash equivalents 6,595 24,096 23,872
184,976 213,450 182,151
Assets held for sale - 200 -
Total assets 760,196 772,410 754,231
Current liabilities
Trade and other payables (77,372) (107,875) (80,526)
Derivative financial instruments 11 (24) (99) (24)
Borrowings 8 (45,425) (13,422) (25,496)
Lease liabilities (8,984) (7,884) (9,292)
Provisions 13 (3,285) (2,535) (6,002)
(135,090) (131,815) (121,340)
Net current assets 49,886 81,835 60,811
Total assets less current liabilities 625,106 640,595 632,891
Non-current liabilities
Borrowings 8 (99,008) (99,784) (98,992)
Lease liabilities (31,618) (33,330) (34,541)
Deferred tax liabilities (93,272) (85,495) (89,929)
Provisions 13 (6,799) (7,732) (9,562)
(230,697) (226,341) (233,024)
Total liabilities (365,787) (358,156) (354,364)
Net assets 394,409 414,254 399,867
Equity
Share capital 4,096 4,096 4,096
Share premium 4,458 4,458 4,458
Retained earnings 784,851 806,141 790,971
Other reserves 14 (398,996) (400,491) (399,658)
Equity attributable to owners of the company 394,409 414,204 399,867
Non-controlling interest - 50 -
Total equity 394,409 414,254 399,867
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 2024 4,096 4,458 790,971 (399,658) 399,867 - 399,867
Profit for the period - - 8,589 - 8,589 - 8,589
Other comprehensive expense - - (567) - (567) - (567)
Total comprehensive income for the period - - 8,022 - 8,022 - 8,022
Transactions with owners:
Share based payments - - 874 - 874 - 874
Current tax on share based payments - - (219) - (219) - (219)
Equity dividends paid - - (14,135) - (14,135) - (14,135)
Issue of own shares held on exercise of share options - - (662) 662 - - -
At 30 June 2024 (unaudited) 4,096 4,458 784,851 (398,996) 394,409 - 394,409
Balance at 1 January 2023 4,096 4,458 807,894 (400,290) 416,158 51 416,209
Profit for the period - - 22,397 0 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 July 2023 4,096 4,458 806,141 (400,491) 414,204 50 414,254
(Loss)/profit for the period - - (1,337) - (1,337) 1 (1,336)
Other comprehensive (expenses)/income - - (159) 57 (102) - (102)
Total comprehensive(expenses)/income for the period - - (1,496) 57 (1,439) 1 (1,438)
Transactions with owners:
Share based payments - - 876 - 876 - 876
Deferred tax on share based payments - - (234) - (234) - (234)
Equity dividends paid - - (13,341) - (13,341) - (13,341)
Issue of own shares held on exercise of share options - - (776) 776 - - -
Acquisition on subsidiary non-controlling interest - - (199) - (199) (51) (250)
At 31 December 2023 (audited) 4,096 4,458 790,971 (399,658) 399,867 - 399,867
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
Half year ended Half year ended 30/06/2023 Year ended 31/12/2023
30/06/2024
£'000 £'000 £'000
Cash flow from operating activities
Cash generated from operations (Note 10) 10,758 22,178 63,656
Interest paid (3,023) (1,675) (3,667)
Other interest paid - lease liabilities (1,261) (884) (2,368)
Tax paid (501) (3,369) 630
Net cash inflow from operating activities 5,973 16,250 58,251
Cash flows from investing activities
Purchase of property, plant and equipment (24,422) (32,667) (65,653)
Proceeds from sale of property, plant and equipment 3 342 2,070
Purchase of intangible assets - (1,908) (2,423)
Settlement of deferred consideration - - (112)
Purchase price adjustment on completion of acquisition 171 - -
Payment for acquisition of subsidiary, net of cash acquired - - (2,642)
Interest receivable 47 151 257
Net cash outflow from investing activities (24,201) (34,082) (68,503)
Cash flows from financing activities
Dividends paid (14,135) (21,566) (34,907)
Drawdown of borrowings 58,000 13,000 30,000
Repayment of borrowings (38,000) - (5,000)
Repayment of lease liabilities (4,915) (3,790) (9,986)
Acquisition of Non Controlling Interest - - (250)
Net cash inflow/(outflow) from financing activities 950 (12,356) (20,143)
Net decrease in cash and cash equivalents (17,277) (30,188) (30,395)
Cash and cash equivalents at beginning of the year 23,872 54,283 54,283
Exchange gains/(losses) on cash and cash equivalents - 1 (16)
Cash and cash equivalents at end of the period 6,595 24,096 23,872
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 2024 were authorised for issue in accordance with a
resolution of the Directors on 6 August 2024. All disclosed documents relating
to these results are available on the Group's website at www.ibstock.co.uk
(http://www.ibstock.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 2023, 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 2023 were approved by the
Board of Directors on 5 March 2024. 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 2024 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 2023, which have been
prepared in accordance with UK-adopted International Accounting Standards
(IAS).
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 2023, 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:
• Supplier Finance Arrangements (Amendments to IAS 7 & IFRS 7);
• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16);
• Classification of Liabilities as Current or Non-Current (Amendments to IAS 1);
and
• Non-current Liabilities with Covenants (Amendments to IAS 1)
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 2023. The areas of critical judgement relating to exceptional items
(see Note 5), 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) and the Group's future cash flows
expected to arise from Cash Generating Units (CGUs) assumptions related to
long-term industry demand (see Note 9) are still considered critical to the
preparation of the interim financial statements for the period ended 30 June
2024.
Going concern
Despite the macroeconomic downturn, there are initial positive external market
indicators with inflation continuing to fall, mortgage rates stabilising, and
proposed housing and planning policy changes which could increase consumer
confidence looking forward. The Group does not believe that the going concern
basis of preparation represents a significant judgement.
The Group's financial planning and forecasting process consists of a budget
for the next year followed by a medium-term projection. 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 testing within their going concern assessment.
In arriving at their conclusion on going concern, the Directors have given due
consideration to whether the funding and liquidity resources above are
sufficient to accommodate the principal risks and uncertainties faced by the
Group, particularly those relating to economic conditions and operational
disruption. The strategic report sets out in more detail the Group's approach
and risk management framework.
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.
The Group has financing arrangements comprising: £100 million of private
placement notes issued in November 2021 with maturities of between 7 and 12
years and a £125 million Revolving Credit Facility (RCF) for an initial four
year tender, with an enacted one year extension option arranged in 2022. At 30
June 2024, £45 million under RCF had been drawn.
Covenants under the Group's RCF and private placement notes require leverage
of no more than 3 times net debt to adjusted EBITDA(1), and interest cover of
no less than 4 times, tested bi-annually at each reporting date with reference
to the previous 12 months. At 30 June 2024 covenant requirements were met with
significant headroom.
The key uncertainty faced by the Group is the industry demand for its products
in light of macroeconomic factors. Accordingly, the Group has modelled
financial scenarios which see reduction in the industry demands for its
products thereby stress testing the Group's resilience. For each scenario,
cash flow and covenant compliance forecasts have been prepared. In the most
severe but plausible scenario industry demand for Clay products is modelled to
be around 40% lower than 2022(1) in the 2024 year, which is materially worse
than the sales reduction seen in 2023, recovering to around 35% lower than
2022 in 2025. Concrete products are modelled to be around 35% lower than 2022
in the 2024 year, recovering to around 30% lower than 2022 in 2025
In the severe but plausible scenario, the Group has sufficient liquidity and
headroom against its covenants, with covenant headroom expressed as a
percentage of annual adjusted EBITDA(1) being in excess of 30% in relation to
the period under review.
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 are taken. This test
indicates that, at a reduction of 49% in sales volumes versus 2022 in both H2
2024, and 2025, the Group would be at risk of breaching its covenants.
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.
(1. Representing normalised levels of industry demand)
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 capital and other 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 EBIT, Adjusted EBITDA and Adjusted EBITDA margin
In the current year, the Directors have introduced Adjusted EBIT as a new APM,
in light of the Group's move to focus investors on this performance measure
and its use as a key remuneration measure for senior management. It represents
earnings before interest, taxation and adjusted for exceptional items and
incremental depreciation and amortisation following fair value uplift.
Adjusted EBITDA is the earnings before interest, taxation, depreciation and
amortisation adjusted for exceptional items. Adjusted EBITDA margin is
Adjusted EBITDA expressed as a proportion of revenue.
The Directors regularly use Adjusted EBIT, 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 EBIT and Adjusted EBITDA are 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 associated taxation on the
adjusting items.
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 year ended
12 month period ended
12 month period ended
30/06/2024 30/06/2023 31/12/2023
£'000 £'000 £'000
Net debt (137,838) (89,110) (100,616)
Adjusted EBITDA 82,196 131,789 107,357
Impact of IFRS 16 (13,772) (8,946) (12,134)
Adjusted EBITDA prior to IFRS 16 68,424 122,843 95,223
Ratio of net debt to adjusted EBITDA 2.0x 0.7x 1.1x
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 Audited
12 month period ended 12 month period ended Year ended
30/06/2024 30/06/2023 31/12/2023
£'000 £'000 £'000
Adjusted EBITDA 82,196 131,789 107,357
Less depreciation (34,570) (32,779) (34,626)
Less amortisation (6,938) (6,939) (6,938)
Adjusted earnings before interest and taxation 40,688 92,071 65,793
Average net debt 119,227 67,516 94,863
Average equity 397,138 415,232 407,061
Average pension (9,302) (12,841) (10,160)
Average capital employed 507,063 469,907 491,764
Adjusted ROCE 8.0% 19.6% 13.4%
Average capital employed figures are derived using the following closing
balance sheet values:
30 June 2024 31 December 2023 30 June 2023 31 December 2022
£'000 £'000 £'000 £'000
Net debt 137,838 100,616 89,110 45,922
Equity 394,409 399,867 414,254 416,209
Less: Pension assets (8,771) (9,832) (10,488) (15,194)
Capital employed 523,476 490,651 492,876 446,937
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 adjusted for
exceptional items (defined above), fair value adjustments being the
amortisation and depreciation on fair value uplifted assets, non-cash interest
and changes in taxation rate 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 30/06/2024 Half year ended 30/06/2023 31 December
2023
Statutory rate of taxation in the UK 25.00% 23.50% 23.50%
Less impact of permanent differences* 1.30% 0.80% 0.84%
Less impact of changes in estimates re. prior periods (0.14%) - 0.27%
Adjusted ETR 26.16% 24.30% 24.61%
Effect of higher rate applied to deferred tax 0.24% 0.70% 2.87%
Adjusting items tax impact 0.70% 2.47%
Reported ETR 27.10% 25.0% 29.95%
* 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 £4.2 million (30 June 2023: less cash flows of £1.5 million; 31
December 2023: less cash flows of £5.4 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
£7.7 million (30 June 2023: £nil; 31 December 2023: £4.6 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 £4.7 million
(30 June 2023: £5.2 million; 31 December 2023: £12.8 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 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 mergers and
acquisitions (M&A) activity and other investing and financing activities.
Reconciliation of statutory cash flow statement to adjusted cash flow
statement
Six months ended 30 June 2024 (unaudited) Statutory Exceptional Reclassification Adjusted
£'000 £'000 £'000 £'000
Adjusted EBITDA 34,478 3,226 - 37,704
Change in working capital (23,618) 4,231 - (19,387)
Net interest (4,284) - 47 (4,237)
Tax (501) - - (501)
Post-employment benefits 520 - (520) -
Other (620) 223 (4,222) (4,619)
Adjusted operating cash flow 5,975 7,680 (4,695) 8,960
Cash conversion 24%
Total capex (24,422) (24,422)
Adjusted free cash flow (18,447) 7,680 (4,695) (15,462)
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)
Year ended 31 December 2023 (audited) Statutory Exceptional Reclassification Adjusted
£'000 £'000 £'000 £'000
Adjusted EBITDA 76,595 30,762 - 107,357
Change in working capital (31,636) (5,355) - (36,991)
Impairment charges 20,599 (20,599) - -
Net interest (6,035) - 257 (5,778)
Tax 630 - - 630
Post-employment benefits 790 - (1,081) (291)
Other (2,692) (177) (12,012) (14,881)
Adjusted operating cash flow 58,251 4,631 (12,836) 50,046
Cash conversion 47%
Total capex (65,653) - - (65,653)
Adjusted free cash flow (7,402) 4,631 (12,836) (15,607)
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 2024
Clay Concrete Unallocated Total
£'000 £'000 £'000 £'000
Bricks and masonry 115,508 7,664 - 123,172
Roofing - 8,859 - 8,859
Fencing and landscaping - 13,525 - 13,525
Flooring and lintels 623 21,634 - 22,257
Facades 3,281 - - 3,281
Rail and infrastructure - 5,993 - 5,993
Other - 1,102 - 1,102
Total revenue 119,412 58,777 - 178,189
Adjusted EBITDA 34,192 7,486 (3,974) 37,704
Adjusted EBITDA margin 28.6% 12.7% 21.2%
Exceptional items impacting operating profit (see Note 5) (3,080) (146) - (3,226)
Depreciation and amortisation pre fair value uplift (11,802) (2,734) (100) (14,636)
Incremental depreciation and amortisation following fair value uplift (2,963) (2,427) - (5,390)
Net finance costs (460) (252) (1,958) (2,670)
Profit/(loss) before tax 15,887 1,927 (6,032) 11,782
Taxation (3,193)
Profit for the period 8,589
There were no bill and hold sales included within revenue during the six
months ended 30 June 2024. At 30 June 2024, £0.7 million of inventory
remained on the Clay division's premises and £0.1 million on Concrete
division's premises related to prior period bill and hold sales. During the
current period, one customer accounted for greater than 10% of Group revenues
with £27.2 million of sales across the Clay and Concrete divisions.
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. There were one
customer accounted for greater than 10% of Group revenues with £39.4 million
of sales across the Clay and Concrete divisions.
Year ended 31 December 2023
Clay Concrete Unallocated & elimination Total
£'000 £'000 £'000 £'000
Total revenue 292,220 113,619 - 405,839
Adjusted EBITDA 98,847 18,623 (10,113) 107,357
Adjusted EBITDA margin 33.8% 16.4% 26.5%
Exceptional items impacting operating profit (see Note 5) (28,170) (2,404) (188) (30,762)
Depreciation and amortisation pre fair value uplift (23,406) (5,733) (175) (29,314)
Incremental depreciation and amortisation following fair value uplift (7,374) (4,876) - (12,250)
Net finance costs (2,015) (569) (2,380) (4,964)
Profit/(loss) before tax 37,882 5,041 (12,856) 30,067
Taxation (9,007)
Profit for the year 21,060
Clay Concrete Unallocated Total
Total segment assets £'000 £'000 £'000 £'000
At 30 June 2024 615,448 132,635 12,113 760,196
At 31 December 2023 610,867 133,502 9,862 754,231
At 30 June 2023 619,731 138,307 14,372 772,410
Clay Concrete Unallocated Total
Total segment liabilities £'000 £'000 £'000 £'000
At 30 June 2024 (164,725) (47,785) (153,277) (365,787)
At 31 December 2023 (174,062) (46,127) (134,175) (354,364)
At 30 June 2023 (186,081) (47,470) (124,605) (358,156)
5. EXCEPTIONAL ITEMS
Unaudited Unaudited Audited
Half year ended Half year ended Year ended
30/06/2024 30/06/2023 31/12/2023
Exceptional cost of sales
Impairment charge - Property, plant and equipment - (7,530) (15,397)
Impairment reversal - Right-of-use assets - - (1,181)
Impairment charge - working capital - (1,668) (4,022)
Total impairment charges - (9,198) (20,600)
Redundancy Costs (135) - (7,470)
Other costs associated with restructuring programme (2,884) (1,530) (1,196)
Total exceptional cost of sales (3,019) (10,728) (29,266)
Exceptional administrative expenses:
Redundancy costs (207) - (1,496)
Total exceptional administrative expenses (207) - (1,496)
Exceptional items impacting operating profit (3,226) (10,728) (30,762)
Total exceptional items (3,226) (10,728) (30,762)
Included within the current period were the following exceptional items:
Exceptional cost of sales
Other costs associated with restructuring programme represent costs incurred
as a result of the Group's restructuring programme announced during 2023.
These costs include site security, insurance, rates, costs associated with
decommissioning activities and other standing charges in connection with
closed sites. These costs have been categorised as exceptional due to the
materiality of programme costs and non-recurring nature of the event giving
rise to them.
Redundancy costs relate to the severance for employees engaged in production
activities following the Group's announced restructuring. These costs have
been categorised as exceptional due to the materiality of programme costs, and
the unusual and non-recurring nature of the events giving rise to them.
Exceptional Administrative expenses
Exceptional redundancy costs arising in the current period relate to costs of
redundancy of employees within the Group's selling, general and administrative
("SG&A") functions following the Group's restructuring programme announced
in 2023. The costs have been treated as exceptional due to the materiality of
programme costs and the non-recurring nature of the event giving rise to them.
Tax on exceptional items
In the current period, the redundancy costs are treated as tax deductible. The
total tax credit on exceptional items was £0.8 million.
Six-month period ended 30 June 2023 and year ended 31 December 2023
Details of exceptional items included within the prior interim and full year
periods are disclosed within Note 5 of the Group's 2023 interim results and
2023 Annual Report and Accounts, respectively.
6. TAXATION
The taxation charge for the interim period represents 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:
Unaudited Unaudited Audited
Half year ended Half year ended 30/06/2023 Year ended 31/12/2023
30/06/2024
(000s) (000s) (000s)
Basic weighted average number of Ordinary Shares 392,627 392,063 392,217
Effect of share incentive awards and options 4,683 3,152 3,437
Diluted weighted average number of Ordinary Shares 397,310 395,215 395,654
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:
Unaudited Unaudited Audited
Half year ended Half year ended 30/06/2023 Year ended 31/12/2023
30/06/2024
£000 £000 £000
Profit for the period attributable to the parent shareholders 8,589 22,397 21,060
Add back exceptional costs (Note 5) 3,226 10,728 30,762
Less tax credit on exceptional items (807) (2,605) (6,952)
Add Incremental depreciation and amortisation following fair value uplift 5,390 6,091 12,250
(Note 4)
Less tax credit on fair value adjustments (1,347) (1,480) (2,878)
Less net non-cash interest income (1,566) (225) (826)
Add back tax charge on non-cash interest credit 392 55 194
Add back impact of deferred taxation rate change 28 223 844
Adjusted profit for the period attributable to the parent shareholders 13,905 35,184 54,454
Unaudited Unaudited Audited
Half year ended Half year ended 30/06/2023 Year ended 31/12/2023
30/06/2024
pence pence pence
Basic EPS on profit for the period 2.2 5.7 5.4
Diluted EPS on profit for the period 2.2 5.7 5.3
Adjusted basic EPS on profit for the period 3.5 9.0 13.9
Adjusted diluted EPS on profit for the period 3.5 8.9 13.8
8. BORROWINGS
Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Cash and cash equivalents 6,595 24,096 23,872
Current
Private placement (330) (324) (333)
Revolving Credit Facility (45,095) (13,098) (25,163)
(45,425) (13,422) (25,496)
Non-current
Private placement (99,008) (99,784) (98,992)
Net debt (137,838) (89,110) (100,616)
At the current and prior period ends, the Group held £100 million of private
placement notes from Pricoa Private Capital, with maturities of between 2028
and 2033 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 (pre IFRS16 net debt
to adjusted EBITDA) and interest cover (adjusted EBITDA to net finance
charges) of no more than 3 times and at least 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 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 2022. 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
at a margin of 235bps.
This RCF contains debt covenant requirements that align with those of the
private placement with the same testing frequency. As at 30 June 2024 the RCF
was drawn down by £45.0 million (31 December 2023: £25.0 million, 30 June
2023: £13.0 million). As at the date of approval of these financial
statements, the drawn down amount remained at £45.0 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
£85.6 million (31 December 2023: £88.3 million, 30 June 2023: £83.0
million).
No security is provided over the Group's borrowings.
9. IMPAIRMENT
For the year ended 31 December 2023, management completed a detailed
impairment review for the sites that had been announced to be closed, which
resulted in an asset impairment of £20.6 million.
Management also completed detailed testing of value-in-use ("VIU") for the
Group's remaining operating CGUs at 31 December 2023, with no further
impairment charges recognised.
The key assumption used within the VIU calculations are noted below:
1. Management used the latest Board approved budget and strategic planning
forecasts in its estimated future cash flows, covering the period 2024 to
2028, which included assumptions regarding industry demand for the Group's
products. These forecasts assumed a return to normalised levels of industry
demand for the Group's products (defined as a level of demand in line with the
2022 year) over the medium term.
Management was of the view that a downside sensitivity, evaluated as an
unforeseen material reduction of greater than 10% in the long-term industry
demand for the Group's products (against a level of demand in line with the
2022 year) could lead to a risk of impairment of the Group's non-current
assets of between £15 million and £25 million.
At 30 June 2024, management reviewed the internal and external sources of
information and concluded that the key assumption remained appropriate, and
accordingly, no new impairment indicators since 31 December 2023 have been
identified. Therefore, no detailed impairment review was performed as at 30
June 2024.
However, management took the decision to test those CGUs which demonstrated
the lowest levels of headroom when performing its detailed testing of
impairment as at 31 December 2023.
The other assumptions used within the VIU calculation are noted below:
1. A pre-tax weighted average cost of capital ("WACC") of 11%-14% was used within
the VIU calculation based on an externally derived rate and benchmarked
against industry peer group companies.
2. Terminal growth rates of 2% were used reflecting long term inflationary
expectations and management's past experience and expectations.
Management is of the view that no reasonable movement in the other assumptions
of the WACC or terminal growth rate outlined would result in impairment of the
Group's non-current assets.
No further impairment charges were recognised as at 30 June 2024.
10. NOTES TO THE GROUP CASHFLOW STATEMENT
Unaudited Unaudited Audited
Half year ended Half year ended Year ended
30/06/2024 30/06/2023 31/12/2023
Cash flows from operating activities £'000 £'000 £'000
Profit before taxation 11,782 29,875 30,067
Adjustments for:
Depreciation 16,557 16,613 34,626
Impairment of property plant and equipment - 7,529 15,397
Impairment of right-of-use assets - - 1,181
Impairment of working capital - 1,670 4,022
Amortisation of intangible assets 3,469 3,469 6,938
Finance costs 2,670 2,180 4,964
gain on disposal of property, plant and equipment (11) (1,393) (1,957)
Research and development expenditure credit (1,230) (750) (2,427)
Share based payments 874 1,432 2,308
Post-employment benefits 520 149 790
Other (254) (592) (617)
34,377 60,182 95,292
Decrease/(increase) in inventory 2,559 (19,539) (28,495)
(Increase)/decrease in trade and other receivables (20,807) (10,676) 28,298
Increase in trade and other creditors (850) (9,193) (36,865)
(Decrease)/increase in provisions (4,521) 1,404 5,426
Cash generated from operations 10,758 22,178 63,656
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 2024, 31 December 2023 and 30 June 2023, the Group's fair value
measurements were categorised as Level 2, except for (i) quoted investments
within the Group's pension schemes, which were valued as Level 1 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.
The Group entered into forward currency contracts as cash flow hedges to
manage its exposure to foreign currency fluctuations associated with future
purchases of plant and equipment required for the construction of major
capital expenditure projects. These instruments are measured at fair value
using Level 2 valuation techniques subsequent to initial recognition.
At 30 June 2024, a liability valued at £0.1 million (31 December 2023: a
liability of £0.1 million; 30 June 2023: a liability of £0.1 million) was
recognised for these derivative financial instruments.
At 30 June 2024, 31 December 2023 and 30 June 2023, 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 £85.6 million (31 December 2023: £88.3 million, 30 June
2023: £83.0 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
2024, the opening Scheme surplus of £9.8 million decreased to a closing
surplus of £8.8 million. Analysis of the movements during the six-month
period ended 30 June 2024 was as follows:
£'000
Scheme surplus at 1 January 2024 (audited) 9,832
Administration expenses (520)
Interest income 215
Remeasurement due to:
- Change in financial assumptions 20,344
- Change in demographic assumptions 1,621
- Experience gain 7,653
- Return on plan assets (30,374)
Scheme surplus at 30 June 2024 (unaudited) 8,771
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 insured 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 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 2023. The assumptions have been updated based on
market conditions at 30 June 2024:
Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
Per annum Per annum Per annum
Discount rate 5.15% 5.25% 4.55%
RPI inflation 3.25% 3.25% 3.10%
CPI inflation 2.75% 2.65% 2.50%
Rate of increase in pensions in payment 3.65% 3.65% 3.60%
Mortality assumptions: life expectation at age 65
For male currently aged 65 21.4 years 21.4 years 21.4 years
For female currently aged 65 24.2 years 24.1 years 24.1 years
For male currently aged 40 23.1 years 23.1 years 23.1 years
For female currently aged 40 26.0 years 25.9 years 25.9 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.
In June 2023, the High Court ruled that a failure to obtain a "Section 37
certificate" alongside an amendment where there is a statutory requirement to
do so would render the amendment void. If effected, this issue could affect
scheme liabilities if it is not possible to locate Section 37 certificates
where required. This ruling was under appeal as at 30 June 2024 but the Court
of Appeal rejected the appeal on 24 July 2024. The Scheme's legal advisers are
not yet undertaking an analysis of the Scheme's historic documentation and no
allowance has been made for the ruling within the IAS19 disclosures at 30 June
2024. This position will be revisited in future sets of disclosures.
13. PROVISIONS
Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Restoration (i) 4,985 4,231 5,489
Dilapidations (ii) 3,983 4,138 4,620
Restructuring (iii) 978 1,530 5,037
Other (iv) 138 368 418
10,084 10,267 15,564
Current 3,285 2,535 6,002
Non-current 6,799 7,732 9,562
10,084 10,267 15,564
Restoration (i) Dilapidations (ii) Restructuring (iii) Other (iv) Total
£'000 £'000 £'000 £'000 £'000
At 1 January 2024 5,489 4,620 5,037 418 15,564
Charged to the income statement 67 - 15 - 82
Utilised (51) - (4,074) (49) (4,174)
Unwind of discount/change in rate (520) (566) - - (1,086)
Reversed unused - (71) - (231) (302)
At 30 June 2024 4,985 3,983 978 138 10,084
(i)The restoration provision comprises obligations governing site remediation
and improvement costs to be incurred in compliance with applicable
environmental regulations together with constructive obligations stemming from
established practice once the sites have been fully utilised. Provisions are
based upon management's best estimate of the ultimate cash outflows. The key
estimates associated with calculating the provision relate to the cost per
acre to perform the necessary remediation work as at the reporting date
together with determining the expected year of retirement. Climate change is
specifically considered at the planning stage of developments when restoration
provisions are initially estimated. This includes projection of costs
associated with future water management requirements and the form of the
ultimate expected restoration activity. Other changes to legislation,
including in relation to climate change, are factored into the provisions when
legislation becomes enacted. Estimates are reviewed and updated annually based
on the total estimated available reserves and the expected mineral extraction
rates. Whilst an element of the total provision will reverse in the
medium-term (one to ten years), the majority of the legal and constructive
obligations applicable to mineral-bearing land will unwind within a
twenty-year timeframe. In discounting the related obligations, expected future
cash outflows have been determined with due regard to extraction status and
anticipated remaining life. Discount rates used are based upon UK Government
bond rates with similar maturities.
(ii) Provisions for dilapidations arose as contingent liabilities recognised
upon the business combination in the period ended 31 December 2015. They are
recognised on a lease by lease basis and are based on the Group's best
estimate of the likely contractual cash outflows, which are estimated to occur
over the lease term. Third party valuation experts are used periodically in
the determination of the best estimate of the contractual obligation, with
expected cash flows discounted based upon UK Government bond rates with
similar maturities.
(iii)The restructuring provision comprised obligations arising from the
completion of the Group's review of operations during the second half of 2023,
which involved sites closures and associated redundancy costs. The key
estimates associated with the provision relate to redundancy costs per
impacted employee. All of the cost is expected to be incurred within one year
of the balance sheet date.
(iv)Other provisions include provisions for legal and warranty claim costs,
which are expected to be incurred within one year of the balance sheet date.
14. OTHER RESERVES
Cash flow hedging reserve Merger reserve Own shares held Treasury shares Total other reserves
Balance at 1 January 2024 (25) (369,119) (514) (30,000) (399,658)
Issue of own shares held on exercise of share options - - 514 148 662
At 30 June 2024 (unaudited) (25) (369,119) - (29,852) (398,996)
Balance at 1 January 2023 (audited) 418 (369,119) (1,589) (30,000) (400,290)
Other comprehensive expense (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 July 2023 (unaudited) (82) (369,119) (1,290) (30,000) (400,491)
Other comprehensive income 57 - - - 57
Issue of own shares held on exercise of share options - - 776 - 776
At 31 December 2023 (audited) (25) (369,119) (514) (30,000) (399,658)
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. These shares represented shares held in the
Employee Benefit Trust (EBT) 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. All remaining shares
held in EBT were issued to meet share option requirements in the current
period.
Treasury share reserve
The Group holds the treasury shares to meet the future requirements of
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.
At 30 June 2024, the treasury shares are shown as a deduction from
shareholders' equity at cost totalling £29.9 million at 30 June 2024 (30 June
2023: £30.0 million, 31 December 2023: £30.0 million).
15. RELATED PARTY TRANSACTIONS
Balances and transactions between Ibstock Plc (the ultimate Parent) and its
subsidiaries, which are related parties, are eliminated on consolidation and
are not disclosed in this note. There were no further material related party
transactions, nor any related party balances in either the 2024 or 2023
financial periods other than remuneration for the Directors and key management
personnel.
16. DIVIDENDS PAID AND PROPOSED
A final dividend for 2023 of 3.6 pence per ordinary share (2022: 5.5 pence)
was paid on 31 May 2024. The Directors have declared an interim dividend of
1.5 pence per ordinary share in respect of 2024 (2023: 3.4 pence), amounting
to a dividend cost of £5.9 million (2023: £13.3 million). The interim
dividend will be paid on 13 September 2024 to all shareholders on the
register at close of business on 23 August 2024.
These condensed consolidated financial statements do not reflect the 2024
interim dividend payable.
17. POST BALANCE SHEET EVENTS
Except for the proposed interim 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 2024 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 2024 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
6 August 2024
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