REG - Ibstock PLC - Preliminary Results
08/03/2023 07:15
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RNS Number : 2216S Ibstock PLC 08 March 2023
Preliminary results
8 March 2023
Ibstock plc
Results for the year ended 31 December 2022
Strong financial performance and further strategic progress
Ibstock plc ("Ibstock" or the "Group"), a leading UK manufacturer of clay
bricks and concrete products and solutions, announces its results for the year
ended 31 December 2022.
Statutory Results
Year ended 31 December 2022 2021 ∆ 1Y % change
Revenue £513m £409m +£104m +26%
Profit before taxation £105m £65m +£40m +61%
EPS 21.6p 7.8p +13.8p >100%
Adjusted Results(1)
Year ended 31 December 2022 2021 ∆ 1Y % change
Adjusted EBITDA £140m £103m £37m +36%
Adjusted EBITDA margin 27.2% 25.2% +200bps +8%
Adjusted EPS 22.7p 13.9p 8.8p +63%
Total dividend per share 8.8p 7.5p +1.3p +17%
Adjusted free cashflow £50m £51m £(1)m (3)%
ROCE 23.4% 15.8% +760bps +48%
Net debt £46m £39m +£7m (18)%
A year of strong performance
● Strong trading performance for the year, with both revenue and profit
materially ahead of both the prior year and pre-pandemic comparators
● Adjusted EBITDA 1 (#_ftn1) of £140 million (2021: £103 million) was ahead
of our expectations set at the beginning of the year, with EBITDA margin of
27.2% (2021: 25.2%)
● Return on Capital Employed1 (ROCE) increased to 23.4% (2021: 15.8%) ahead of
medium term target of 20%
● Balance sheet strength maintained with closing leverage of 0.4x (Dec 21: 0.4x)
after £38 million of growth capital and £30 million share buyback during the
year
● Recommended final dividend of 5.5 pence per share (2021: 5.0p), growing full
year dividend by 17% to 8.8 pence per share (2021: 7.5p)
Building for the future
● Growth capital of £38 million deployed in the year to support our strategic
growth over the medium-term
● Atlas and Aldridge brick projects are on track to commission from the end of
2023, delivering over 100 million bricks of lower-cost capacity per annum,
with the whole Atlas range to be externally verified as carbon neutral
● Strategic acquisitions and investments in fast-growth areas of UK construction
markets during the year have accelerated diversified growth through Ibstock
Futures
● Brick slip investment strategy further refined, to both accelerate
commissioning of an initial capacity extension, as well as incorporate more
advanced and efficient process technology in the purpose built factory
● Continued strong progress towards ambitious ESG targets, including commitment
to deliver 40% absolute reduction in carbon by 2030
● Ibstock Futures to open new state of the art innovation hub in West Midlands
during H1 2023
● Continued investment in people and culture delivering a step change in health,
safety and wellbeing during the year
● Balance sheet strength provides resilience and strategic optionality to invest
further for growth and return additional capital to shareholders over the
medium term
Current trading and outlook
● Activity in the early weeks of 2023 has continued to reflect the more cautious
demand environment seen in Q4 2022
● Energy price risk well covered with over 80% of energy requirements secured
for H1 2023 and 65% secured for the full year
● Our focus will balance disciplined management of price, cost and capacity in
the near-term with the delivery of our major growth projects and strategic
progress to ensure delivery against our medium-term targets
● We expect conditions to remain subdued through the early part of 2023, but
anticipate this to improve as the year progresses, supported by sequential
demand improvement
● As such, the Board's expectations for the full year are unchanged
Joe Hudson, Chief Executive Officer, commented:
"These strong results reflect our continued focus on commercial and
operational execution, which has enabled the Group to deliver significant
growth and improved returns despite a challenging backdrop. Revenue and profit
were materially ahead of both the prior year and pre-pandemic levels,
reflecting the strategic progress we have made over the last five years, with
the development of a high quality, lower cost and highly efficient asset base
allied to the strength of our market positions.
"We have faced into the challenges of recent years to emerge as a more
diverse, higher quality business, with a strong management team and a clear
strategy focused on value creation in the years ahead. As we face another
period of uncertainty, we will draw on this experience to optimise our
performance in the short term, while continuing to invest in, and diversify,
the business to ensure we remain well placed to deliver on our medium-term
targets.
"Activity in the early weeks of 2023 has continued to reflect the more subdued
demand environment experienced towards the end of last year, although we
anticipate this to improve as the year progresses. With the strong strategic
platform we now have in place, I am confident both in our ability to respond
effectively to conditions this year, and to achieve significant growth over
the medium-term."
Results presentation
Ibstock is holding a presentation at 10.30am today at 54 Hatton Garden,
London, EC1N 8HN.
Please contact ibstock@citigatedewerogerson.com
(mailto:ibstock@citigatedewerogerson.com) to register your in-person
attendance.
A live webcast of the presentation and Q&A is also available. Please
register here (https://brrmedia.news/Ibstock_fy_results) 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: +44 (0) 33 0551 0200
US: +1 786 697 3501
Confirmation code: please quote Ibstock Full Year Results when prompted
An archived version of today's webcast analyst presentation will be available
on http://www.ibstockplc.com (http://www.ibstockplc.com) later today.
Ibstock plc 01530 261 999
Joe Hudson, CEO
Chris McLeish, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith
Holly Gillis
About Ibstock plc
Ibstock plc is a leading UK manufacturer of clay bricks and a diversified
range of clay and concrete products and solutions. Its principal products are
clay bricks, brick components, concrete roof tiles, concrete alternatives for
stone masonry, concrete fencing and pre‐stressed concrete products.
The Group comprises two core business divisions, Ibstock Clay and Ibstock
Concrete, with Ibstock Futures established to accelerate diversified growth
opportunities.
Ibstock Clay: The leading manufacturer by volume of clay bricks sold in the
United Kingdom. With 16 manufacturing sites, Ibstock Brick has the largest
brick production capacity in the United Kingdom. It operates a network of 18
active quarries located close to its manufacturing plants. Ibstock Kevington
provides masonry and pre-fabricated component building solutions, operating
from 6 sites across the United Kingdom.
Ibstock Futures: Complements our core businesses by accelerating diversified
growth opportunities and addressing key construction trends, including
sustainability and the shift towards Modem Methods of Construction (MMC).
Ibstock Concrete: A leading manufacturer of concrete roofing, walling,
flooring and fencing products, along with lintels and general concrete
building products, with 14 manufacturing plants in the United Kingdom.
Forward-looking statements
This announcement contains "forward-looking statements". These forward-looking
statements include all matters that are not historical facts and include
statements regarding the intentions, beliefs or current expectations of the
directors. By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances that are
difficult to predict and outside of the Group's ability to control.
Forward-looking statements are not guarantees of future performance and the
actual results of the Group's operations. Forward-looking statements speak
only as of the date of such statements and, except as required by applicable
law, the Group undertakes no obligation to update or revise publicly any
forward-looking statements.
Chief Executive's Review
Introduction
This has been an outstanding year for Ibstock, and it is pleasing to see how
our performance in 2022 reflects the significant strategic progress we have
made as a business over the last few years. The transformed platform of
capability we now have in place has been critical in enabling the delivery of
very strong financial performance in the 2022 year, and I am confident that it
will underpin the continuing success of our business over the years ahead. I
am grateful for the incredible team of people at Ibstock who have enabled us
to navigate the challenges of recent years and emerge stronger, whilst always
retaining focus on our longer-term goals.
Over recent years, we have made significant investment in strategic growth,
enabling us to anticipate and respond to evolving trends in the construction
sector, and positioning us well to maximise opportunities in a range of
emerging, fast-growing niche segments of this market. We have also invested
consistently in our people, building strength in our business, and creating
opportunity for all our colleagues. At the same time, our unwavering focus on
execution and disciplined capital allocation have ensured resilience in our
performance, supporting returns to shareholders even in the most challenging
of times.
Recent months have presented different challenges, with macroeconomic
uncertainty, inflation and higher interest rates weighing on the demand
picture. We will face into these challenges with the same disciplined approach
to capacity management, costs and commercial execution to ensure we optimise
performance in the short term.
Ibstock has been, and will remain, an extremely cash generative business,
having returned around £265 million to shareholders, equivalent to around 68
pence per share, over the last 7 years. We remain committed to deploying these
strong cash flows to support both incremental investment and additional
shareholder returns over the years ahead.
Overview
We are reporting a strong performance for 2022, with revenue and profit
materially ahead of both the prior year and pre-pandemic comparators. Trading
was robust, supported by good commercial and operational execution across the
business, together with strong demand from our new build residential, Repairs,
Maintenance and Improvement (RMI), and infrastructure customers.
The Group managed supply chain and inflation challenges well and we continued
to price dynamically to recover cost inflation throughout the year, delivering
a 26% increase in revenues with volumes broadly in line with the prior year.
Market conditions were buoyant for most of the year, although we experienced
lower sales volumes in the final quarter, reflecting a more cautious demand
environment. Industry brick inventories remained at historically low levels,
with the market having to rely on imported bricks to satisfy around 23% of
delivered volumes, due to the constraints on UK capacity.
The more subdued demand conditions observed in the final quarter of 2022 have
continued in the early weeks of 2023 although we anticipate this to improve as
the year progresses, supported by sequential demand improvement. The strength
of our balance sheet provides resilience as we trade through these more
challenging conditions, and our focus will be on cost and capacity management,
alongside dynamic commercial execution, to ensure that we optimise near-term
performance regardless of market conditions. With the inherent advantages in
our domestic business model, we are well positioned to displace imported
products if overall demand remains at lower levels for any sustained period.
On a medium and longer-term view, the UK residential construction markets we
serve remain underpinned by positive structural growth drivers, including
projected population growth, a continuing shortage of housing and supportive
government policy. We are also well positioned to capitalise upon
opportunities across the diversified markets in which we operate, building on
the initial expansion of our Ibstock Futures business, which has grown its
scale and capabilities rapidly over the last 12 months. Overall growth capital
of £38 million was invested across our core business and Futures during the
year to support our medium-term growth, and we expect to invest further growth
capital of around £55 million during the 2023 year.
Ibstock has an ambition to be the most sustainable manufacturer of clay and
concrete products in the UK, and also to lead our sector in ESG disclosure and
transparency. In 2022, we achieved an absolute carbon reduction of 13%
relative to our 2019 baseline. Whilst this represented a slight increase year
on year, we remain committed to taking the actions necessary to ensure that
the Group achieves a 40% reduction in absolute carbon by 2030, and that we are
a net-zero carbon operation by 2040.
Reflecting the strong profit performance of the business, the Board is pleased
to recommend a final dividend of 5.5p per share (2021: 5.0p), bringing the
full year dividend to 8.8p per share (2021: 7.5p), an increase of 17%. In
recommending this level of dividend, the Board remains mindful of its
objective to deliver a sustainable and progressive ordinary dividend over
time.
Financial Performance
The Group delivered a strong trading performance in 2022, with revenue,
operating profit and free cash flow materially ahead of the prior year.
Revenue of £513 million was 26% up on 2021 as the Group performed well, with
robust demand across its end markets. Industry-wide supply chain challenges
were well managed and the impact of inflationary pressures on our cost base,
particularly energy, was mitigated through our well-established dynamic
commercial approach in both the clay and concrete divisions. Adjusted
EBITDA(1) grew by 36% to £140 million (2021: £103 million) and the adjusted
EBITDA(1) margin increased to 27.2%, compared to 25.2% in 2021 and 16.5% in
2020. Statutory earnings per share grew by 13.8 pence to 21.6 pence (2021: 7.8
pence) reflecting the strength of earnings in the year.
Our Return on Capital Employed(1) (ROCE) increased materially to 23.4% (2021:
15.8%), with both the stronger operating profit performance and a continuing
focus on capital management contributing to this improvement. We will continue
to deploy capital in a dynamic and disciplined way and target a ROCE(1)
consistent with the stated medium-term target of 20%.
The balance sheet remains strong with closing leverage of 0.4x net debt to
adjusted EBITDA(1) (Dec 21: 0.4x) after investing £38 million of growth
capital and a £30 million share buyback during the year. Adjusted Free cash
flow(1) was strong at £50 million (2021: £51 million), reflecting robust
trading and a continued focus on the efficient management of working capital.
The Board expects to generate capital in excess of that required for its
investment requirements and remains committed to returning surplus capital to
shareholders as part of its dynamic and disciplined capital allocation
strategy. The potential for additional returns of capital will be kept under
active review.
Divisional Review
Ibstock Clay
Divisional revenue grew by 32% year on year to £369 million (2021: £280
million) and adjusted EBITDA(1) increased by 40% to £127 million (2021: £91
million), delivering an adjusted EBITDA(1) margin of 34.3%, up by 200 basis
points on the prior year (2021: 32.3%). Ibstock Futures recognised net
operating costs of £5 million, reflecting a small loss of around £1m from
the acquired businesses, and £4 million of operational investment in research
and development, and in building in-house innovation and commercial
capability.
The clay business delivered a strong result in the year, benefiting from solid
operational performance, disciplined cost management and a dynamic commercial
approach that recovered in full significant variable cost inflation.
Commercial and operational actions to enhance sales mix also contributed to
the strong margin performance.
Market conditions were positive for most of 2022, reflecting resilient new
build and RMI residential demand, with overall volumes consistent with the
prior year. Housing starts in 2022 were broadly in line with the prior year,
although activity slowed in the final quarter in response to a more cautious
demand environment. RMI demand also remained resilient for the majority of the
year, although we again experienced some softening in volumes towards the end
of the period as macroeconomic uncertainty and rising interest rates began to
impact on discretionary consumer expenditure.
A solid operational performance underpinned the strength of the results, with
consistent reliability and efficiency across the plant network.
Our Atlas and Aldridge brick manufacturing growth projects are on track to
commission from the end of 2023, and set to deliver over 100 million bricks of
lower-cost capacity per annum, with the whole Atlas range to be externally
verified as carbon neutral.
Ibstock Futures
Ibstock Futures ("Futures") accelerated its development in the year,
underpinned by strategic investments made to build its capabilities in
fast-growth areas of the UK construction market.
The asset acquisition from glass reinforced concrete panel technology
specialist, Telling GRC, in early 2022 established a strong position in a new
market that offers cost savings and environmental benefits to customers
through the construction process. The Telling assets were integrated
successfully during the year, and progress and performance have continued to
be in line with our expectations.
Later in the year, the acquisition of Generix, a UK supplier of
non-combustible façade systems, represented a further strategic step to
broaden the range of systems offered by Futures, as our customers seek lower
carbon, non-combustible forms of cladding for use in the mid- to high- rise
and modular market segments.
We have a strong pipeline of opportunities to invest further capital within
Ibstock Futures in the service of diversified growth over the years ahead.
We have also continued to develop the brick slip investment strategy and
identified opportunities to re-configure the project, to both accelerate
commissioning of an initial capacity extension, as well as incorporate more
advanced and efficient process technology in the purpose built factory. As
part of this, we initiated in 2022 an investment of up to £8 million, to be
deployed over the next 12 months, on an automated slip line, providing
capacity for up to 17 million slips, coming on stream by the end of 2023.
At this stage, commissioning for the main line is expected in late 2024.
We have made further progress during the year to unlock value from our
unrivalled clay reserves. During the second half of the year, we commissioned
a pilot plant for the production of expanded clay - a lightweight aggregate
that has multiple application uses in the construction sector and which is in
short supply. We have also advanced our project focused on calcined clay,
which has huge potential as a lower carbon cementitious replacement. Over
the coming year we expect to continue to develop these projects, which are
firmly centred on the Group's strategic ambition to lead our sector for
sustainability and environmental impact. We are also excited to report that,
during the 2022 year we fired our first bricks using synthetic gas from a
waste source in partnership with a strategic partner with funding support from
Innovate UK, the UK's innovation agency.
We continue to see Futures as a key driver of Ibstock's growth over the
medium-term and, in addition to acquisitions, we are making organic investment
in our assets and capabilities to support future expansion. We are announcing
today the creation of a state-of-the-art innovation hub in the West Midlands
to provide a platform for rapid innovation and expansion. This facility,
which has been secured on a long-term lease, is expected to be operational by
the end of the second quarter of 2023.
Ibstock Concrete
The Concrete division delivered a strong performance, benefiting from its
exposure to a broad range of residential and infrastructure markets, with a
resilient demand backdrop and solid operational performance.
Divisional revenue in 2022 grew 12% to £144 million (2021: £128 million),
reflecting stronger pricing across the business. Adjusted EBITDA(1) of £24
million was around 9% higher than the prior year (2021: £22 million),
reflecting strong commercial execution across all product categories. Adjusted
EBITDA(1) margins of 16.4%, were marginally below the level achieved in 2021
of 16.9%, reflecting operational inefficiencies within our roof tile business
in the early part of the year. As expected, we saw the divisional margins
improve during the second half of the year towards our medium-term ambition of
18%.
Overall, sales volumes were marginally below the prior year, reflecting some
softening in demand during the final quarter of the year. Infrastructure
volumes grew strongly, with both rail and structural categories showing
double-digit growth year-on-year. This helped to offset lower volumes across
floor beams and associated ancillaries, with a reduction in year-on-year sales
towards the end of the year as house builder demand reduced. Walling stone
volumes were ahead of the prior year as the business grew share in key
regional territories. Roofing volumes were modestly lower, held back by
production issues at our roof tile factory in Leighton Buzzard during the
first half of the year. The actions taken to enhance operational performance
at this factory delivered material improvements in reliability and efficiency
during the latter part of the year.
Strategic Update
As a business, we remain focused on delivering strong strategic progress to
provide further sustainable advantage over the years ahead, and I am pleased
with the progress we made in this regard during the year. The strong
performance in 2022 has delivered significant progress towards the medium-term
financial targets we set out in March 2022.
Our strategy is driven from our belief that the construction market will
continue to evolve, adopting more sustainable and industrialised processes,
practices and products. We are focused on building our capabilities across the
business to position us well to maximise our opportunities in these developing
new markets.
Our strategic development extends far beyond the acquisitions and partnerships
we have made in the year. Our three strategic pillars: Sustain; Innovate; and
Grow focus our activities across all of our operations to align to our
collective goals. Progress achieved this year is detailed further below.
Sustain
As a large scale industrial business, sustainable high performance is at the
heart of what we do. 2022 was a further year of strong progress, with
improvement in all areas: health, safety and wellbeing; operational
excellence; and environmental performance.
Health, safety and wellbeing
The health, safety and wellbeing of our employees is always our first
priority, and our continuing commitment is core to our success. Our key health
and safety metric is Lost Time Injury Frequency Rate ("LTIFR"), which saw a
marked improvement in the year to 1.47 and is now ahead of our medium term
target. Our concrete division achieved a fantastic milestone in 2022 by
operating for a full year without a Lost Time Incident (LTI).
During the year, we placed considerable focus on evolving our culture through
the launch of the "Ibstock Story" acting as a strong cultural catalyst,
embedded a new health and safety management system across the business and
created a Health & Wellbeing network to promote focus on mental health.
Operational excellence
The consistent performance of our factories is vital to ensure that we have a
sustainable, cost-competitive operating footprint. During the year, we
successfully rolled out the second phase of our Asset Transformation Programme
across the clay network, driving a stronger culture of preventative
maintenance and improved reliability. This investment programme is starting to
deliver significant benefits to our clay business, reflected in the strong
fixed cost performance achieved during the 2022 year.
Within concrete, the establishment of a five-year automation plan within our
fencing and building factories will support a significant uplift in capacity,
efficiency and quality over the years ahead, helping to maintain our
industry-leading margins.
Environmental performance
Our ESG 2030 Strategy provides a comprehensive framework to drive progress in
our environmental performance. During the year, we established a set of
detailed, factory-level targets, with an increased focus on measuring and
improving environmental outcomes.
In 2022, we achieved an absolute carbon reduction of 13% relative to our 2019
baseline. Whilst this represented a slight increase year on year, we remain
focussed on achieving our ambition of a 40% reduction by 2030. Noteworthy
achievements in the year included a 31% reduction in mains water use and a 16%
reduction in plastic packaging (with both metrics calculated per tonne of
production against a 2019 baseline).
We are proud to have been awarded the 2022 Manufacturer of the Year at the
Business Green awards, in recognition of our industry leadership for
environmental sustainability.
Innovate
Innovation is at the heart of our growth plans, and we are committed to the
continuing enhancement of our product portfolio and customer proposition to
strengthen our market-leading positions.
Product innovation
In a fast evolving construction market, continual product innovation is
crucial to our success.
Within the clay division, we launched a number of new brick types, with a
particular focus on simulated handmade bricks, premium products which will
compete against brick types currently imported into the UK market.
In September 2022, our Concrete Division entered into a new partnership to
create ultra-low carbon concrete products with Earth Friendly Concrete (EFC).
EFC is more sustainable than traditional concrete, with around 70% less
embodied carbon. The partnership will see EFC's ultra-low carbon, zero cement
technology integrated into our diverse portfolio of high-performance building
products over the years ahead, including our range of products for the rail,
infrastructure and UK housing markets.
Customer experience
We continue to seek ways to enhance the experience of our customers at every
stage of their engagement with us.
To this end, during the 2022 year we strengthened and diversified our
nationwide distribution capabilities through the establishment of two new
haulage relationships. This change will ensure that our business can access
industry-leading technology, pursue greener fuel alternatives and optimise the
efficiency of our haulage routes.
We have also taken steps during the year to simplify and improve the customer
experience through further investment in our customer services teams and the
development of a digital portal, allowing customers to place and amend orders
more easily.
Digital transformation
The digitisation of our business will be a key strategic enabler over the
coming years as we look to drive an increasing proportion of our activity
through digital channels.
During 2022, we made the key appointment of a new Chief Information and
Digital Officer (CIDO) who has been central to defining a medium-term digital
transformation programme. This programme will be centred on two core
principles: adopting a "One Ibstock" mind-set, standardising core platforms
and ways of working to improve efficiency and reduce complexity; and customer
centricity, focusing on superior integration and automation with our
customers. In order to maintain our digital advantage, the year ahead will see
us upgrade our core infrastructure, focused on the ERP platform, enterprise
data and key customer-facing applications.
Grow
The Group's growth strategy is based on a combination of continued development
of its core business and effective diversification into attractive new
segments of the construction market. The strategy is being supported by
targeted investment projects and acquisitions which create value and
accelerate delivery.
Investment in core
The enhancement projects within our existing Clay business, which were
initiated in 2019, are now complete and delivering the planned capacity
uplifts and process efficiencies. The Atlas and Aldridge growth projects are
on track to commission from the end of 2023. These investments will deliver
significant further capacity and with Atlas being our pathfinder factory on
our journey to Net Zero, expected to produce an exciting range of carbon
neutral verified products for our customers within the next 12 months.
Diversified growth
The continuing development of Ibstock Futures provides a focus for our
strategic ambitions to grow through the introduction of products, solutions
and technology designed to support, and benefit from, the megatrends of
sustainability and the industrialisation of construction methods.
The two acquisitions completed in 2022 within Futures are strategically
important, and both present the opportunity to scale rapidly over the medium
term. We have also made significant progress in developing the organisation,
strategy and medium-term goals of Futures and have a strong pipeline of
opportunities to invest further capital in the service of diversified growth
over the years ahead.
People
Our people will always be our most important asset, and as an organisation, we
are seeking to create a culture driven by performance and led by our values.
In 2022, we launched a people strategy centred on four elements: employee
experience; attracting future talent; capabilities for resilience and growth;
and creating culture as a point of difference.
Having a diverse workforce, which is truly representative of the communities
in which we operate, is important to both our cultural ambitions and business
success. At the end of the year, female leadership representation stood at
27%. We have clear plans in place to support the achievement of our 40% target
by 2030.
Our industry-leading Apprenticeship programme continues to gather momentum,
growing our pipeline of future talent. We are part of the "5% club" which
targets having at least 5% of employees in "earn and learn" positions. We
finished the 2022 year with over 50 early career positions (including
apprentice roles) and over 120 of our other employees engaged in qualifying
learning activities. This represented a total of 7.5% of earn & learn
positions across the business, putting us firmly on course to achieve our
ambition of at least 10% by 2030.
A central pillar of our social agenda is our commitment to develop and support
our people, and to maintain a strong workforce with the capability to deliver
our strategic objectives over the long-term. To this end, during the final
quarter of the 2022 year, we made a one-off payment of up to £2,000 to
colleagues most heavily impacted by the cost of living crisis, representing a
total cost of around £4 million. We also made a grant of 500 free shares
(Fire-up share award) during the 2022 year to all employees below the senior
leadership team level, to ensure that value created flows through to all our
employee stakeholders.
Progress towards medium-term targets
The platform of capability we now have in place, combined with the investments
we are making, provide confidence in our ability to deliver strong growth over
the medium-term.
Within the clay business, we are on track to commission our redeveloped Atlas
and Aldridge factories by the end of the year, creating over 100 million
bricks of lower cost capacity, and the UK's first verified carbon neutral clay
bricks. With around £35 million of capital still to be spent, we expect to
deliver at least an incremental £18 million of adjusted EBITDA(1) from 2025.
Alongside this, incremental growth within the clay business will be driven by
continuing to capture marginal gains in commercial execution, new product
development and capacity/cost over the years ahead.
Within our concrete products business, we have a number of opportunities to
deploy capital to realise further capacity in the network, access adjacent
categories and capture cost savings through greater automation. We invested
around £2 million of growth capital in 2022 in automated equipment for our
walling stone factory in Anstone, Yorkshire, which will deliver around £1
million in incremental adjusted EBITDA(1) from 2024. We have a pipeline of
further opportunities in concrete to invest capital for fast payback over the
medium-term.
Within Futures, we have an ambition to create a significant, diversified
business operating in modern construction markets over the next four years.
The business, from its inception around 12 months ago, is already delivering
strong growth, and will target revenues approaching £20 million in 2023, with
both Telling and Generix scaling quickly as part of the Ibstock group. Our
brick slips investments, comprising an automated slip line delivering up to 17
million slips, commissioning from the end of 2023, and the larger Nostell slip
systems factory, at this stage expected to commission from the end of 2024,
will create a strong, diversified position in this fast growing product
category. And we have a pipeline of further opportunities, including our
exciting sustainability projects, to deliver growth over the next few years.
Overall, we expect Futures to grow revenues to £100 million, with adjusted
EBITDA(1) margins approaching 20%, by 2026.
We have made strong initial progress, and expect this to momentum to continue
over the next 6-18 months as we build towards our medium term ambitions.
Outlook for 2023
Trading in the early weeks of 2023 has continued to reflect the cautious
demand environment experienced towards the end of last year although we
anticipate this to improve as the year progresses, supported by sequential
demand improvement. Against this background, we are maintaining a disciplined
approach to capacity management, costs and commercial execution.
The Group is in good shape, with a clear strategy based on both core and
diversified growth, sustainable market leadership positions and a strong
balance sheet. As such, the Board's expectations for the full year are
unchanged.
Chief Financial Officer's report
Introduction
The Group delivered a strong financial performance in 2022, with both profit
and operating cash flows materially ahead of the comparative period. Demand in
our end markets was firm, although we experienced lower volumes in the final
quarter of the year, reflecting a more cautious demand environment.
The Group managed supply chain and inflationary challenges well, and the
dynamic pricing approach taken in both the clay and concrete divisions was
successful in recovering cost inflation during the year. A continued
disciplined focus on cost management underpinned an improved margin
performance, with adjusted EBITDA(1) margins increasing by 200 basis points to
27.2% in the 2022 year (2021: 25.2%).
Alongside this strong trading performance, the Group maintained its intense
focus on capital management, delivering a good cash flow performance for the
year. This was instrumental in enabling the Group to maintain a strong balance
sheet, with closing net debt(1) of £46 million at 31 December 2022 resulting
in leverage(1) of 0.4 times (Dec 2021: 0.4 times).
In line with our dynamic approach to capital allocation, we deployed around
£38 million of capital investments in the service of future growth (over and
above our sustaining investments), and completed a £30 million share buyback.
With our strong financial position, and inherently cash generative business,
we expect to generate significant further cash to support growth and
shareholder returns over the medium term.
During the final quarter of the year, the Group took the opportunity to extend
its Revolving Credit Facility, in accordance with the terms of its 4+1 year
agreement completed in November 2021, thereby extending by a further 12 months
its debt maturity profile on terms aligned to the existing agreement. At 31
December 2022, the Group had £125 million of undrawn committed facilities in
place.
In December 2022 the Group also agreed a buy-in transaction for the main
defined benefit pension scheme, involving the purchase of an insurance
contract with a specialist pensions provider which will cover all remaining
pension liabilities. This transaction, which involved no initial cash payment
by the Company, is expected to substantially complete during the 2023
financial year. We are delighted to have completed this significant further
step towards removing pensions risk from the Group's balance sheet.
Climate Change & TCFD
As a long-term business, a commitment to environmental sustainability and
social progress is central to the company's 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. Having achieved strong progress
against our previous targets, during 2021 we reviewed our ESG strategy and
ambitions in order to drive progress and continue to show industry leadership
in this area.
At the same time, in order to assess the resilience of our business model, as
part of our strategic planning process we have modelled the impact of both
transition and physical risks of climate change on the financial performance
and position of the Company. The outputs from this exercise are detailed in
our TCFD disclosures in the 2022 Annual Report and Accounts.
The Group is committed to increasing the transparency of reporting around
climate impacts, risks, and opportunities. This year we have progressed to
achieve full compliance with the recommendations of the Task Force for
Climate-related Financial Disclosures (TCFD).
Alternative performance measures
This results statement contains alternative performance measures ("APMs") to
aid comparability and further understanding of the financial performance of
the Group between periods. A description of each APM is included in Note 3 to
the financial statements. The APMs represent measures used by management and
the Board to monitor performance against budget, and certain APMs are used in
the remuneration of management and Executive Directors. It is not believed
that APMs are a substitute for, or superior to, statutory measures.
Group results
The table below sets out segmental revenue and adjusted EBITDA(1) for the year
Clay Concrete Central costs Total
£'m £'m £'m £'m
Year ended 31 December 2022
Total revenue 369.2 143.7 - 512.9
Adjusted EBITDA(1) 126.7 23.6 (10.6) 139.7
Margin 34.3% 16.4% 27.2%
Year ended 31 December 2021
Total revenue 280.2 128.4 - 408.7
Adjusted EBITDA(1) 90.6 21.7 (9.3) 103.1
Margin 32.3% 16.9% 25.2%
(1) Alternative Performance Measures are described in Note 3 to the results
announcement
Due to rounding, numbers presented may not add up precisely to the totals
provided and percentages may not precisely reflect the absolute figures
Revenue
Group revenue for the 2022 year increased by 26% to £512.9 million (2021:
£408.7 million). Performance benefited from strong pricing management, and
reflected a robust demand backdrop for the majority of the year, although
market activity slowed in the final quarter, reflecting a more cautious demand
environment.
In our Clay division, revenues of £369.2 million represented an increase of
32% on the prior year period (2021: £280.2 million). Performance reflected a
material price benefit, delivered through a dynamic commercial approach.
Volumes were in line with the comparative period, despite lower volumes in the
final quarter as activity slowed in response to a reduction in end-market
demand. Our Futures business contributed around £4 million of revenue (2021:
nil).
In our Concrete division, revenue increased by 12% year-on-year to £143.7
million (2021: £128.4 million), with marginally lower volumes more than
offset by a strong pricing benefit, which recovered in full the impact of
significant cost inflation. Infrastructure sales volumes increased
year-on-year, and walling stone volumes also increased as the Group grew share
in certain key regional territories. This helped offset lower sales volumes in
flooring and roof tiles.
Whilst we expect market conditions in 2023 to be more challenging, we continue
to monitor cost impacts closely and remain committed to taking the actions
necessary to protect unit margins.
Adjusted EBITDA(1)
Management measures the Group's operating performance using adjusted
EBITDA(1). Adjusted EBITDA(1) increased materially year on year to £139.7
million in 2022 (2021: £103.1 million).
Performance in 2022 benefited from resilient end markets, alongside strong
commercial execution to recover in full significant variable cost inflation.
These actions, combined with the disciplined management of cost, resulted in a
material improvement in adjusted EBITDA(1) margins, which increased by 200
basis points to 27.2% (2021: 25.2%). In response to the challenges faced by
our employees, we made a one-off cost of living payment, totalling a cost of
around £4 million, during the 2022 year.
Within the Clay division, adjusted EBITDA(1) totalled £126.7 million (2021:
£90.6 million), representing an adjusted EBITDA(1) margin of 34.3% (2021:
32.3%). The improvement in adjusted EBITDA(1) reflected a combination of
significant pricing benefits, solid operational performance and disciplined
cost management. The division recognised a loss of £5.3 million in respect of
Ibstock Futures, as the business continued to invest in research &
development, in-house innovation and commercial capability.
Adjusted EBITDA(1) in our Concrete division increased to £23.6 million (2021:
£21.7 million), as the division continued to benefit from its exposure to a
broad range of residential and infrastructure markets. Adjusted EBITDA(1)
margins of 16.4% were marginally below 2021 levels (2021: 16.9%), reflecting
principally the impact of operational challenges during the first half of the
year at our roof tile factory in Leighton Buzzard. As expected, adjusted
EBITDA(1) margins moved forwards during the second half of the year.
Central costs increased to £10.6 million (2021: £9.3 million) reflecting
higher variable remuneration costs and the initial impact of the Fire-up share
award to all employees below the senior leadership team level.
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 gain of
£6.3 million (2021: £5.2 million gain), comprising:
1. Exceptional net cash credit of £6.9 million (which were substantially cash
settled in the period):
a) £7.0 million of exceptional cash profits arising from the disposal of a
surplus property in Sussex during the 2022 year;
b) £0.1 million charge of other one-off operating costs;
2. An exceptional non-cash charge of £0.6 million comprising of an impairment
associated with the Group's closure of sites as part of its single
co-ordinated restructuring plan.
Further details of exceptional items(1) are set out in Note 5 of the financial
statements.
Finance costs
Net finance costs of £2.7 million were below the level of the prior year
(2021: £5.0m) with lower interest cost on our borrowings (reflecting the
favourable debt refinancing completed in November 2021) and increased interest
income from the Group's main defined benefit pension scheme. The Group
incurred costs of around £0.3 million during the second half of the 2022 year
related to the 12-month extension of its Revolving Credit Facility.
Profit before taxation
Group statutory profit before taxation was £104.8 million (2021: £64.9
million), reflecting stronger trading, with the current year result including
an exceptional credit(1) of £6.3 million (2021: credit of £5.2 million).
Taxation
The Group recorded a taxation charge of £17.9 million (2021: £33.1 million)
on Group pre-tax profits of £104.8 million (2021: £64.9 million),
resulting in an effective tax rate ("ETR") of 17.1% (2021: 51.0%) compared
with the standard rate of UK corporation tax of 19%. The lower statutory tax
charge and ETR are primarily due to no taxable gain arising on the land
disposal during the year as well as a prior year deferred tax credit being
recognised as a result of reassessing the deferred tax balance relating to
property, plant and equipment.
The adjusted ETR(1) (excluding the impact of the deferred tax rate change and
exceptional items) for the 2022 year was 16.5% (2021: 18.1%). The reduction in
adjusted ETR from the prior year was due primarily to the higher level of
permanent benefit arising from the super deduction which provides statutory
tax relief on 130% of qualifying capital expenditure. The other main item
affecting the adjusted ETR is the prior year deferred tax credit referred to
above.
Earnings per share
Group statutory basic earnings per share (EPS) increased to 21.6 pence in the
year to 31 December 2022 (2021: of 7.8 pence) principally as a result of the
Group's increased profit after taxation, reflecting the stronger trading
result.
Group adjusted basic EPS(1) of 22.7 pence per share increased significantly
from the 13.9 pence reported last year, reflecting the increased adjusted
EBITDA(1) achieved in the year and a modest reduction in the adjusted
effective tax rate. In line with prior years, our adjusted EPS(1) metric
removes the impact of exceptional items(1), the fair value uplifts resulting
from our acquisition accounting and non-cash interest impacts, net of the
related taxation charges/credits. Adjusted EPS(1) has been included to provide
a clearer guide as to the underlying earnings performance of the Group. A full
reconciliation of our adjusted EPS(1) measure is included in Note 7.
Table 1: Earnings per share
2022 2021
pence pence
Statutory basic EPS - Continuing operations 21.6 7.8
Adjusted basic EPS(1) - Continuing operations 22.7 13.9
Cash flow and net debt(1)
Adjusted operating cash flow increased by £32 million to £108.0 million
(2021: 76.0 million), principally due to a material increase in adjusted
EBITDA(1). The Group reported a modest increase in working capital totalling
£1.8 million outflow (2021: £5.4 million inflow) as a small increase in
finished goods inventory levels was substantially offset by robust management
of trade receivables, reflecting the continuing progress made by the
organisation in reducing DSO.
Net interest paid in 2022 reduced to £4.3 million (2021: £5.6 million)
reflecting the lower interest coupon following the refinancing of the Group's
debt in November 2021. Tax payments totalled £11.7 million (2021: £10.0
million), on higher levels of taxable profit compared to the prior year. Other
cash outflows of £12.1 million (2021: £15.1 million outflow) included
amounts totalling £5.6 million in respect of carbon emission credits
purchased during the year (2021: £6.4 million), with the balance being
principally operating leases payments.
With Adjusted Operating Cash Flows(1) in 2022 increasing materially from the
prior year, the Cash conversion(1) percentage increased to 77% (from 74% in
2021), reflecting strong balance sheet discipline and working capital focus.
Adjusted free cash flow(1) decreased marginally in the year to £49.7 million
(2021: £51.0 million), as capital expenditure of £58.4 million increased by
£33.4 million on 2021 (£25.0 million). The 2022 figure comprised around £21
million of sustaining expenditure, £33 million on the Atlas and Aldridge
redevelopments and around £4 million on other growth projects. In the 2023
year, sustaining expenditure is expected to be around £20 million, with
growth investments in Atlas, Aldridge and Futures expected to total
approximately £55 million.
During the 2022 year, we completed a £30 million share buyback programme,
demonstrating our ability to deliver enhanced returns to shareholders whilst
continuing to invest in our future growth.
Table 2: Cash flow (non-statutory)
2022 2021 Change
£'m £'m £'m
Adjusted EBITDA(1) 139.7 103.1 36.6
Adjusted change in working capital(1) (1.8) 5.4 (7.1)
Net interest (4.3) (5.6) 1.3
Tax (11.7) (10.0) (1.7)
Post-employment benefits (1.8) (1.8) -
Other(2) (12.1) (15.1) 2.9
Adjusted operating cash flow(1) 108.0 76.0 32.0
Cash conversion(1) 77% 74% +3ppts
Total capex (58.4) (25.0) (33.4)
Adjusted free cash flow(1) 49.7 51.0 (1.4)
(1) Alternative Performance Measures are described in Note 3 to the
consolidated financial statements.
(2) Other includes operating lease payments and emission allowances purchases
in all years
The table above excludes cash flows relating to exceptional items(1) in both
years. During 2022, the Group completed the sale of surplus property,
generating cash inflows of £7.8 million (2021: £2.9 million), which was
classified as an exceptional item. We continue to focus on recycling capital
from the Group's property portfolio, and anticipate further surplus land
disposals over the medium term.
Net debt(1) (borrowings less cash) at 31 December 2022 totalled £45.9 million
(31 December 2021: £38.9 million; 30 June 2022: £35.7 million). The movement
during the 2022 year reflected the benefit of strong operating cash flows
offset by around £58.4 million of capital expenditure and the impact of a
£30 million share buy-back.
During the final quarter of the year, the Group extended by a further 12
months its Revolving Credit Facility, in accordance with the terms of its 4+1
year agreement completed in November 2021, on terms aligned to the existing
agreement. At 31 December 2022, the Group had £125 million of undrawn
committed facilities in place.
Return on capital employed(1)
Return on capital employed(1) (ROCE) in 2022 increased to 23.4% (2021: 15.8%).
The substantial improvement compared to the prior year reflected both a
significant increase in adjusted operating profit and a small increase in the
capital base, as both working and fixed capital were well controlled.
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.
During the 2022 year, we completed a £30 million share buyback programme,
purchasing around 17 million shares, and equivalent to around 4% of the
Group's issued share capital.
We expect to deploy significant growth capital in the business during the 2023
year and beyond, with a growing pipeline of both organic and inorganic
opportunities. The Board expects there to be capital generated in excess of
that required for its investment requirements and remains committed to
returning surplus capital to shareholders as part of its dynamic and
disciplined capital allocation strategy. The potential for additional returns
of capital will be kept under active review.
Dividend
Reflecting the very strong profit performance of the business, the Board is
pleased to recommend a final dividend of 5.5p per share (2021: 5.0p), for
payment on 12 May 2023 to shareholders on the register on 21 April 2023. This
will bring the full year dividend to 8.8p per share (2021: 7.5p), an increase
of 17%. In recommending this level of dividend, the Board remains mindful of
its objective to deliver a sustainable and progressive ordinary dividend over
time.
Pensions
At 31 December 2022, the defined benefit pension scheme ("the scheme") was in
an actuarial accounting surplus position of £15.2 million (31 December 2021:
surplus of £57.8 million). Applying the valuation principles set out in
IAS19, at the year end the scheme had asset levels of £373.6 million (31
December 2021: £618.0 million) against scheme liabilities of £358.4 million
(31 December 2021: £560.3 million).
On 20 December 2022, the Scheme completed a full buy-in transaction with a
specialist third-party provider, which represented a significant step in the
Group's continuing strategy of de-risking its pensions exposure. Together with
the partial buy-in transaction in 2020, this will insure all of the Group's
defined benefit liabilities. This transaction, which involved no initial cash
payment by the Company, is expected to substantially complete during the 2023
financial year.
The net decrease in balance sheet surplus over the period is primarily due to
asset performance which has been largely offset by a significant actuarial
gain arising on the liabilities from a change in market conditions,
particularly the rise in corporate bond yields, coupled with the asset loss
from the full Scheme buy-in which transacted in December 2022.
Based on an existing funding agreement, a contribution level of £1.75 million
per annum has applied from February 2022, increasing to £2.0 million from 1
December 2023 and then to £2.25 million from 1 December 2024. 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 regular contributions with effect from 1 March 2023.
Related party transactions
Related party transactions are disclosed in Note 15 to the consolidated
financial statements. During the current and prior year, there have been no
material related party transactions.
Subsequent events
In light of the fact that the Ibstock Pension Scheme was in a net surplus
position after the full pension buy-in, the Group and the Trustees of the
Ibstock Pension Scheme agreed on 27 February 2023 that the Group would suspend
regular contributions into the pension scheme with effect from 1 March 2023.
Except for this pension contribution agreement and the proposed ordinary
dividend, no further subsequent events requiring either disclosure or
adjustment to these financial statements have arisen since the balance sheet
date.
Going concern
The Directors are required to assess whether it is reasonable to adopt the
going concern basis in preparing the financial statements.
In arriving at their conclusion, the Directors have given due consideration to
whether the funding and liquidity resources are sufficient to accommodate the
principal risks and uncertainties faced by the Group.
Having considered the outputs from this work, the Directors have concluded
that it is reasonable to adopt a going concern basis in preparing the
financial statements. This is based on an expectation that the Company and the
Group will have adequate resources to continue in operational existence for at
least twelve months from the date of signing these accounts.
Further information is provided in note 2 of the financial statements.
Statement of directors' responsibilities in relation to the financial
statements
The 2022 Annual Report and Accounts which will be issued in March 2023,
contains a responsibility statement in compliance with DTR 4.1.12 of the
Listing Rules which sets out that as at the date of approval of the Annual
Report on 7 March 2023, the Directors confirm to the best of their knowledge:
- the Group and unconsolidated Company financial statements, prepared in
accordance with the applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit or loss of
the Group and Company, and the undertakings included in the consolidation
taken as a whole; and
- the performance review contained in the Annual Report and Accounts includes
a fair review of the development and performance of the business and the
position of the Group and the undertakings including the consolidation taken
as a whole, together with a description of the principal risks and
uncertainties they face.
This responsibility statement was approved by the Board of Directors on 7
March 2023 and is signed on its behalf by:
Joe Hudson Chris McLeish
Chief Executive Officer Chief Financial Officer
7 March 2023 7 March 2023
CONSOLIDATED INCOME STATEMENT
Notes Year ended 31 Year ended 31
December 2022 December 2021
£'000 £'000
Revenue 4 512,886 408,656
Cost of sales before exceptional items (315,841) (267,662)
Exceptional (cost of)/income from sales 5 (680) 3,495
Cost of sales (316,521) (264,167)
Gross profit 196,365 144,489
Distribution costs (47,961) (38,829)
Administrative expenses before exceptional items (49,624) (41,511)
Exceptional administrative items 5 - (287)
Administrative expenses (49,624) (41,798)
Profit on disposal of property, plant and equipment before exceptional items (417) 1,638
Exceptional profit on disposal of property, plant and equipment 5 6,958 2,022
Total profit on disposal of property, plant and equipment 6,541 3,660
Other income 2,630 2,524
Other expenses (524) (112)
Operating profit 107,427 69,934
Finance costs (4,553) (5,831)
Finance income 1,890 839
Net finance cost (2,663) (4,992)
Profit before taxation 104,764 64,942
Taxation 6 (17,884) (33,129)
Profit for the financial year 86,880 31,813
Profit attributable to:
Owners of the parent 86,908 31,813
Non-controlling interest (28) -
Notes pence per share pence per share
Earnings per share
Basic - continuing operations 7 21.6 7.8
Diluted - continuing operations 7 21.5 7.7
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes Year ended 31 Year ended 31
December 2022 December 2021
£'000 £'000
Profit for the financial year 86,880 31,813
Other comprehensive income/(expenses):
Items that may be reclassified to profit or loss:
Change in fair value of cash flow hedges(1) 641 (74)
Related tax movements(1) (149) 14
492 (60)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of post-employment benefit assets and obligations(1) 12 (44,581) 12,862
Related tax movements(1) 11,147 (2,525)
(33,434) 10,337
Other comprehensive (expense)/income for the year net of tax (32,942) 10,277
Total comprehensive income for the year, net of tax 53,938 42,090
Total comprehensive income/(expense) attributable to:
Owners of the parent 53,966 42,090
Non-controlling interest (28) -
(1) Impacting retained earnings
Non-GAAP measure
Reconciliation of adjusted EBITDA to Operating profit for the financial year
for continuing operations
Notes Year ended 31 Year ended 31
December 2022 December 2021
£'000 £'000
Operating profit 107,427 69,934
Less exceptional items impacting operating profit 5 (6,278) (5,230)
Add back depreciation and amortisation 4 38,518 38,349
Adjusted EBITDA 139,667 103,053
CONSOLIDATED BALANCE SHEET
Notes 31 December 31 December
2022 2021
£'000 £'000
Assets
Non-current assets
Intangible assets 90,242 94,625
Property, plant and equipment 409,091 375,800
Right-of-use assets 31,478 25,114
Derivative financial instruments 116 -
Post-employment benefit asset 12 15,194 57,754
546,121 553,293
Current assets
Inventories 94,275 72,821
Current tax recoverable 1,717 3,199
Derivative financial instruments 451 -
Trade and other receivables 65,935 64,756
Cash and cash equivalents 54,283 61,199
216,661 201,975
Assets held for sale - 875
Total assets 762,782 756,143
Current liabilities
Trade and other payables (120,003) (103,132)
Derivative financial instrument - (74)
Borrowings 8 (436) (333)
Lease liabilities (7,690) (6,860)
Provisions 9 (1,613) (1,869)
(129,742) (112,268)
Net current assets 86,919 90,582
Total assets less current liabilities 633,040 643,875
Non-current liabilities
Borrowings 8 (99,769) (99,738)
Lease liabilities (25,414) (20,324)
Deferred tax liabilities (84,349) (92,352)
Provisions 9 (7,299) (8,232)
(216,831) (220,646)
Total liabilities (346,573) (332,914)
Net assets 416,209 423,229
Equity
Share capital 4,096 4,096
Share premium 4,458 4,458
Retained earnings 807,894 785,609
Other reserves 14 (400,290) (370,934)
Equity attributable to owners of the company 416,158 423,229
Non-controlling interest 51 -
Total equity 416,209 423,229
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Retained earnings Other reserves (Note 14) Total equity attributable to owners Non-controlling interest Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 4,096 4,458 785,609 (370,934) 423,229 - 423,229
Profit for the year - - 86,908 - 86,908 (28) 86,880
Other comprehensive (expense)/income - - (33,434) 492 (32,942) - (32,942)
Total comprehensive income/(expense) for the year - - 53,474 492 53,966 (28) 53,938
Transactions with owners:
Share based payments - - 2,547 - 2,547 - 2,547
Current tax on share based payment - - 1 - 1 - 1
Deferred tax on share based payment - - 116 - 116 - 116
Equity dividends paid - - (33,701) - (33,701) - (33,701)
Purchase of own shares - - - (30,000) (30,000) - (30,000)
Issue of own shares held on exercise of share options - - (152) 152 - - -
Acquisition of subsidiary non-controlling interest - - - - - 79 79
At 31 December 2022 4,096 4,458 807,894 (400,290) 416,158 51 416,209
Share capital Share premium Retained earnings Other reserves (Note 14) Total equity attributable to owners Non-controlling interest Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 4,096 4,333 759,483 (370,041) 397,871 - 397,871
Profit for the year - - 31,813 - 31,813 - 31,813
Other comprehensive income/(expense) - - 10,351 (74) 10,277 - 10,277
Total comprehensive income/(expense) for the year - - 42,164 (74) 42,090 - 42,090
Transactions with owners:
Share based payments - - 890 - 890 - 890
Deferred tax on share based payment - - 35 - 35 - 35
Equity dividends paid - - (16,780) - (16,780) - (16,780)
Purchase of own shares - - - (1,309) (1,309) - (1,309)
Issue of share capital on exercise of share options - 125 - - 125 - 125
Issue of own shares held on exercise of share options - - (183) 490 307 - 307
At 31 December 2021 4,096 4,458 785,609 (370,934) 423,229 - 423,229
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Cash flow from operating activities
Cash generated from operations 11 137,765 100,497
Interest paid (2,888) (2,928)
Other interest paid - lease liabilities (1,274) (1,107)
Tax paid (11,699) (9,960)
Net cash inflow from operating activities 121,904 86,502
Cash flows from investing activities
Purchase of property, plant and equipment (58,354) (24,960)
Proceeds from sale of property plant and equipment 50 874
Proceeds from sale of property plant and equipment - exceptional 7,833 2,882
Purchase of intangible assets (5,573) (6,402)
Settlement of deferred consideration - (413)
Payment for acquisition of subsidiary undertaking, net of cash acquired 13 (959) -
Interest received 124 -
Net cash outflow from investing activities (56,879) (28,019)
Cash flows from financing activities
Dividends paid (33,701) (16,780)
Drawdown of borrowings - 170,000
Repayment of borrowings - (160,000)
Debt issue costs (259) (1,563)
Repayment of lease liabilities (8,010) (7,575)
Proceeds from issuance of equity shares - 432
Purchase of own shares by Employee Benefit Trust - (1,309)
Cash outflow from purchase of shares 14 (30,000) -
Net cash outflow from financing activities (71,970) (16,795)
Net (decrease)/increase in cash and cash equivalents (6,945) 41,688
Cash and cash equivalents at beginning of the year 61,199 19,552
Exchange losses on cash and cash equivalents 29 (41)
Cash and cash equivalents at end of the year 54,283 61,199
Reconciliation of changes in cash and cash equivalents to movement in net debt
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Net (decrease)/increase in cash and cash equivalents (6,945) 41,688
Proceeds from borrowings - (170,000)
Repayment of borrowings - 160,000
Non-cash debt movement (134) (1,335)
Effect of foreign exchange rate changes 29 (41)
Movement in net debt (7,050) 30,312
Net debt at start of year (38,872) (69,184)
Net debt at end of year (Note 3) (45,922) (38,872)
Comprising:
Cash and cash equivalents 54,283 61,199
Short-term borrowings (Note 8) (436) (333)
Long-term borrowings (Note 8) (99,769) (99,738)
(45,922) (38,872)
1. AUTHORISATION OF FINANCIAL STATEMENTS
The consolidated financial statements of Ibstock plc, which has a premium
listing on the London Stock Exchange, for the year ended 31 December 2022 were
authorised for issue in accordance with a resolution of the Directors on 7
March 2023. The balance sheet was signed on behalf of the Board by J Hudson
and C McLeish. 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.
2. BASIS OF PREPARATION
The consolidated financial statements of Ibstock plc for the year ended 31
December 2022 have been prepared in accordance with International Accounting
Standards (IAS) and International Financial Reporting Standards (IFRS) and
related interpretations as issued by the IASB and IFRS as adopted by the UK.
They are prepared on the basis of all IFRS accounting standards and
interpretations that are mandatory for the period ended 31 December 2022 and
in accordance with the Companies Act 2006. The comparative financial
information has also been prepared on this basis.
The financial information set out does not constitute the Company's statutory
accounts for the year ended 31 December 2022 but is derived from those
accounts. Statutory accounts for 2022 will be delivered to the registrar of
companies in due course. The auditors have reported on those accounts; their
reports were (i) unqualified, (ii) did not include a reference to any matters
to which the auditors drew attention by way of emphasis without qualifying
their report and (iii) did not contain a statement under Section 498 (2) or
(3) of the Companies Act 2006 in respect of the accounts for 2022. The
consolidated financial statements are presented in Pounds Sterling and all
values are rounded to the nearest thousand (£'000) except where otherwise
indicated. The significant accounting policies are set out below.
Basis of consolidation
The consolidated financial statements comprise the financial statements of
Ibstock plc and its subsidiaries as at 31 December 2022. The financial
statements of subsidiaries are prepared for the same reporting period as the
Parent Company, using consistent accounting policies. All intra-Group
balances, transactions, income and expenses and profit and losses resulting
from intra-Group transactions have been eliminated in full.
Subsidiaries are consolidated from the date on which the Group obtains control
and cease to be consolidated from the date on which the Group no longer
retains control. The Group controls an entity when the Group is exposed to, or
has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity.
New standards, amendments and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are
effective for periods beginning after 1 January 2022, and have not been
applied in preparing these consolidated financial statements. None of these is
expected to have a significant effect on the consolidated financial statements
of the Group.
Following the end of the Brexit transition period on 31 December 2020, IFRS
Standards as adopted by the EU were brought into UK law and UK-adopted IFRS
Standards came into effect for the prior year commencing 1 January 2021.
Going concern
Despite the macroeconomic downturn and the resulting decrease in activity
levels across the UK construction industry in quarter four of 2022, there are
initial positive external market indicators and consequently reduced levels of
uncertainty looking forward. Management 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.
During the final quarter of the 2021 year, the Group completed the refinancing
of its March 2023 £215 million Revolving Credit Facility (RCF), replacing the
existing facility with the issuance of £100 million of private placement
notes with maturities of between 7 and 12 years and a £125 million RCF for an
initial four year tenor, with a one year extension option. In addition, in the
final quarter of 2022, the Group enacted a one-year extension of the £125
million RCF, extending maturity to November 2026 on similar terms to the
original agreement. At 31 December 2022 the RCF was undrawn.
Covenants under the Group's RCF and private placement notes require leverage
of no more than 3 times net debt to adjusted EBITDA, and interest cover of no
less than 4 times, tested bi-annually at each reporting date with reference to
the previous 12 months. At 31 December 2022 covenant requirements were met
with significant headroom.
The key uncertainty faced by the Group is the industry demand for its products
in light of macroeconomic factors. Accordingly, the Group has modelled
financial scenarios which see reduction in the industry demands for its
products thereby stress testing the Group's resilience. For each scenario,
cash flow and covenant compliance forecasts have been prepared. In the most
severe but plausible scenario industry demand for Clay and Concrete products
in 2023 is projected to be around 34% and 30% lower respectively than 2022,
which is modestly worse than the sales reduction seen in 2020 during the
height of the pandemic, recovering to around 10% lower than 2022 in 2024.
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 45% in sales volumes in 2023 and 40% in the
first half of 2024 versus 2022 levels, the Group would be at risk of breaching
its covenants.
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 45%.
The Directors consider this to be an highly unlikely scenario, and in the
event of an anticipated covenant breach, the Group would seek to take further
steps to mitigate, including the disposal of valuable land and building assets
and additional restructuring steps to reduce the fixed cost base of the Group.
Having taken account of the various scenarios modelled, and in light of the
mitigations available to the Group, the Directors are satisfied that the Group
has sufficient resources to continue in operation for a period of not less
than 12 months from the date of this report. Accordingly, the consolidated
financial information has been prepared on a going concern basis.
3. ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures ("APMs") are used within the management
report where management believes it is necessary to do so in order to provide
further understanding of the financial performance of the Group. Management
uses APMs in its own assessment of the Group's performance and in order to
plan the allocation of internal capital and resources. Certain APMs are also
used in the remuneration of management and Executive Directors.
APMs serve as supplementary information for users of the financial statements
and it is not intended that they are a substitute for, or superior to,
statutory measures. None of the APMs are outlined within IFRS and they may not
be comparable with similarly titled APMs used by other companies.
In the current year, the previously reported APMs of like-for-like revenue and
like-for-like Adjusted EBITDA margin have been removed to reflect full current
and comparative period ownership of the Longley business eliminating the need
for these measures.
Exceptional items
The Group presents as exceptional on the face of the income statement those
items of income and expense which, because of their materiality, nature and/or
expected infrequency of the events giving rise to them, merit separate
presentation to allow users of the financial statements to understand further
elements of financial performance in the year. This facilitates comparison
with future periods and to assess trends in financial performance over time.
Details of all exceptional items are disclosed in Note 5.
Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA is the earnings before interest, taxation, depreciation and
amortisation adjusted for exceptional items. Adjusted EBITDA margin is
Adjusted EBITDA shown as a proportion of revenue.
The Directors regularly use Adjusted EBITDA and Adjusted EBITDA margin as key
performance measures in assessing the Group's profitability. The measures are
considered useful to users of the financial statements as they represents
common APMs used by investors in assessing a company's operating performance,
when comparing its performance across periods as well as being used in the
determination of Directors' variable remuneration.
A full reconciliation of Adjusted EBITDA is included at the foot of the
Group's consolidated statement of comprehensive income within the consolidated
financial statements. Adjusted EBITDA margin is included within Note 4.
Adjusted EPS
Adjusted EPS is the basic earnings per share adjusted for exceptional items,
fair value adjustments being the amortisation and depreciation on fair value
uplifted assets and non-cash interest, net of taxation (at the Group's
adjusted effective tax rate).
The Directors have presented Adjusted EPS as they believe the APM represents
useful information to the user of the financial statements in assessing the
performance of the Group, when comparing its performance across periods, as
well as being used in the determination of Directors' variable remuneration.
Additionally, the APM is considered by management when determining the
proposed level of ordinary dividend. A full reconciliation is provided in Note
7.
Net debt and Net debt to adjusted EBITDA ("leverage") ratio
Net debt is defined as the sum of cash and cash equivalents less total
borrowings at the balance sheet date. This does not include lease liabilities
arising upon application of IFRS 16.
The Net debt to adjusted EBITDA ratio definition removes the operating lease
expense benefit generated from IFRS16 compared to IAS 17 within adjusted
EBITDA.
The Directors disclose these APMs to provide information as a useful measure
for assessing the Group's overall level of financial indebtedness and when
comparing its performance and position across periods.
Net debt is shown at the foot of the Group consolidated cash flow statement. A
full reconciliation of the net debt to adjusted EBITDA ratio (also referred to
as 'leverage') is set out below:
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Net debt (45,922) (38,872)
Adjusted EBITDA 139,667 103,053
Impact of IFRS 16 (8,491) (7,171)
Adjusted EBITDA prior to IFRS 16 131,176 95,882
Ratio of net debt to adjusted EBITDA 0.4x 0.4x
Adjusted Return on Capital Employed (Adjusted ROCE)
Adjusted Return on Capital Employed ("Adjusted ROCE") is defined as Adjusted
earnings before interest and taxation adjusted for exceptional items as a
proportion of the average capital employed (defined as net debt plus equity
excluding the pension surplus). The average is calculated using the 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:
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Adjusted EBITDA 139,667 103,053
Less depreciation (31,579) (31,409)
Less amortisation (6,939) (6,940)
Adjusted earnings before interest and taxation 101,149 64,704
Average net debt 40,791 46,169
Average equity 426,501 412,761
Average pension (35,707) (50,138)
Average capital employed 431,585 408,792
Adjusted ROCE 23.4% 15.8%
Average capital employed figures comprise:
31 December 30 June 2022 31 December 30 June 2021
2022
2021
£'000 £'000 £'000 £'000
Net debt 45,922 35,660 38,872 53,466
Equity 416,209 436,792 423,229 402,293
Pension 15,194 56,219 57,754 42,521
Adjusted effective tax rate
The Group presents an adjusted effective tax rate ("Adjusted ETR") within its
Financial Review. This is disclosed in order to provide users of the financial
statements with a view of the rate of taxation borne by the Group prior to the
impact of exceptional items (defined above) and the changes in taxation rates
on deferred taxation
A reconciliation of the adjusted ETR to the statutory UK rate of taxation is
included in Note 6.
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 adding back cash flows associated with exceptional items arising in
the year of £0.3 million (2021: adding back cash flows of £2.0 million).
Adjusted operating cash flow
Adjusted operating cash flows are the cash flows arising from operating
activities adjusted to exclude cash flows relating to exceptional items of
£7.3 million (2021: £1.7 million) and inclusion of cash flows associated
with interest income, proceeds from the sale of property, plant and equipment
and lease payments reclassified from investing or financing activities of
£6.8 million (2021: £12.2million).
Cash conversion
Cash conversion is the ratio of Adjusted operating cash flow (defined above)
to Adjusted EBITDA (defined above). The Directors believe this APM provides a
useful measure of the Group's efficiency of its cash management during the
period.
Adjusted free cash flow
Adjusted free cash flow represents Adjusted operating cash flow (defined
above) less total capital expenditure. The Directors use the measure of
Adjusted free cash flow as a measure of the funds available to the Group for
the payment of distributions to shareholders, for use within M&A activity
and other investing and financing activities.
Year ended 31 December 2022 Statutory Exceptional Reclassification Adjusted
£'000 £'000 £'000 £'000
Adjusted EBITDA 146,115 (6,448) - 139,667
Change in working capital (2,035) 267 - (1,768)
Impairment charges 382 (382) - -
Net interest (4,162) - (135) (4,297)
Tax (11,699) - - (11,699)
Post-employment benefits (973) - (777) (1,750)
Other (5,554) (705) (5,882) (12,141)
Adjusted operating cash flow 122,074 (7,268) (6,794) 108,012
Cash conversion 77%
Total capex (58,354) - - (58,354)
Adjusted free cash flow 63,720 (7,268) (6,794) 49,658
Year ended 31 December 2021 Statutory Exceptional Reclassification Adjusted
£'000 £'000 £'000 £'000
Adjusted EBITDA 108,283 (5,230) - 103,053
Change in working capital 3,330 2,028 - 5,358
Impairment charges (5,797) 5,797 - -
Net interest (4,035) - (1,563) (5,598)
Tax (9,960) - - (9,960)
Post-employment benefits (789) - (961) (1,750)
Other (4,530) (860) (9,673) (15,063)
Adjusted operating cash flow 86,502 1,735 (12,197) 76,040
Cash conversion 74%
Total capex (24,960) - - (24,960)
Adjusted free cash flow 61,542 1,735 (12,197) 51,080
4. SEGMENT REPORTING
The Directors consider the Group's reportable segments to be the Clay and
Concrete divisions.
The key Group performance measure is adjusted EBITDA, 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 both years 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.
Year ended 31 December 2022
Clay Concrete Unallocated & elimination Total
£'000 £'000 £'000 £'000
Total revenue 369,193 143,693 - 512,886
Adjusted EBITDA 126,687 23,604 (10,624) 139,667
Adjusted EBITDA margin 34.3% 16.4% 27.2%
Exceptional items impacting operating profit (see Note 5) 6,222 56 - 6,278
Depreciation and amortisation pre fair value uplift (20,659) (5,546) (187) (26,392)
Incremental depreciation and amortisation following fair value uplift (6,936) (5,190) - (12,126)
Net finance costs (366) (430) (1,867) (2,663)
Profit/(loss) before tax 104,948 12,494 (12,678) 104,764
Taxation (17,884)
Profit for the year 86,880
Consolidated total assets 596,769 146,553 19,460 762,782
Consolidated total liabilities (183,079) (52,172) (111,322) (346,573)
Non-current assets
Consolidated total intangible assets 60,945 29,297 - 90,242
Property, plant and equipment 361,389 47,702 - 409,091
Right-of-use assets 20,869 10,419 190 31,478
Total 443,203 87,418 190 530,811
Total non-current asset additions 70,118 8,713 131 78,962
Included within the revenue of our Concrete operations during the year ended
31 December 2022 were £0.1 million of bill and hold transactions. At 31
December 2022, £0.4 million of inventory relating to these bill and hold
transactions remained on the Group's premises. The unallocated segment balance
includes the fair value of the Group's share based payments and associated
taxes (£2.7 million), plc Board and other plc employment costs (£6.4
million), pension costs (£0.8 million) and legal/administrative expenses
(£2.8 million). These costs have been offset by research and development
taxation credits (£1.6 million) and £0.5 million of provision credits
related to the discount rate applied. During the current year, one customer
accounted for greater than 10% of Group revenues with £80.6 million of sales
across the Clay and Concrete divisions.
Year ended 31 December 2021
Clay Concrete Unallocated & elimination Total
£'000 £'000 £'000 £'000
Total revenue 280,235 128,421 - 408,656
Adjusted EBITDA 90,634 21,740 (9,321) 103,053
Adjusted EBITDA margin 32.3% 16.9% 25.2%
Exceptional items impacting operating profit (see Note 5) 5,347 (117) - 5,230
Depreciation and amortisation pre fair value uplift (22,101) (5,981) (135) (28,217)
Incremental depreciation and amortisation following fair value uplift (5,834) (4,298) - (10,132)
Net finance costs (809) (202) (3,981) (4,992)
Profit/(loss) before tax 67,237 11,142 (13,437) 64,942
Taxation (33,129)
Profit for the year 31,813
Consolidated total assets 547,472 145,478 63,193 756,143
Consolidated total liabilities (155,589) (56,764) (120,561) (332,914)
Non-current assets
Consolidated total intangible assets 61,084 33,541 - 94,625
Property, plant and equipment 329,288 46,512 - 375,800
Right-of-use assets 15,438 9,430 246 25,114
Total non-current assets 405,810 89,483 246 495,539
Total non-current asset additions 30,834 6,035 - 36,869
Included within the revenue of our Concrete operations during the year ended
31 December 2021 were £1.2 million of bill and hold transactions. At 31
December 2021, £0.7 million of inventory relating to these sales remained on
the Group's premises. The unallocated segment balance includes the fair value
of the Group's share based payments and associated taxes of (£0.9 million),
plc Board and other plc employment costs (£5.8 million), pension costs (£1.0
million) and legal/administrative expenses (£3.3 million). These costs have
been offset by research and development taxation credits (£1.7 million).
During the current year, one customer accounted for greater than 10% of Group
revenues with £56.7m of sales within the Clay division.
5. EXCEPTIONAL ITEMS
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Exceptional (cost of)/income from sales
Impairment (charge)/reversal - Property, plant and equipment (554) 5,623
Impairment reversal - Right-of-use assets - 174
Total impairment (charge)/credit (554) 5,797
Other costs associated with restructuring programme (126) (2,302)
Total exceptional (cost of)/income from sales (680) 3,495
Exceptional administrative expenses:
Redundancy costs - (100)
COVID-19 administrative expenses - (187)
Total exceptional administrative expenses - (287)
Exceptional profit on disposal of property plant and equipment 6,958 2,022
Exceptional items impacting operating profit 6,278 5,230
Total exceptional items 6,278 5,230
2022
Included within the current year were the following exceptional items:
Impairment charge - property, plant and equipment
The Group impaired the fixed assets at Atlas as part of a restructuring
programme in 2020. Upon making the decision to redevelop the factory, a
partial reversal of this amount was recognised in 2021, based on an estimate
of the assets which were fit for continuing usage. As the redevelopment
activity at the Atlas site has continued, existing building assets have been
identified as unfit for usage, thereby requiring replacement.
Accordingly, those assets that have been identified as unfit for usage have
been fully impaired in the current period. This impairment expense is, in
effect, an adjustment to the impairment reversal booked in 2021. As such, it
is considered appropriate to treat this adjustment on a basis consistent with
the corresponding entry in 2021.
Other costs associated with restructuring programme
As part of the Group-wide restructuring plan to upgrade the Group, the
business announced during 2020 a single coordinated plan to rationalise its
sites. This programme proceeded throughout 2021 and the costs, as expected,
concluded during the first half of 2022.
The Group incurred c£0.1m of net residual costs relating to the sites subject
to closure during the 2022 year. The net balance in the current period
comprised rates and other standing charges related to the former operations,
partly offset by savings from previously provided redundancy schemes.
Exceptional profit on disposal of property, plant and equipment
The Group completed the sale of land and buildings at West Hoathly, Sussex in
October for a total consideration (net of costs and sales tax) of £7.8m. The
combined book value of the site amounted to £0.8m, which had previously been
disclosed with assets held for resale, leading to a gross profit of £7.0m
being recognised as an exceptional gain in 2022.
2021
Included within the prior year were the following exceptional items:
Exceptional income from sales
Impairment reversals arose in the period following the Group's announcements
during 2021 to redevelop its Atlas and Nostell manufacturing sites within the
Clay segment, together with the decision to retain the leased Northwich
administrative facility within the Concrete segment. These decisions are
expected to lead to the utilisation of assets that were impaired in 2020
following the Group's restructuring programme in response to the deterioration
in near-term demand outlook caused by the COVID-19 pandemic. Due to the
initial impairment charge treatment as exceptional items, the reversal is
similarly categorised as exceptional.
Other costs associated with the closure of sites represent other expenses
incurred as a result of the Group's restructuring programme during the prior
year. These costs include site security, insurance, rates and other standing
charges in connection with closed sites. These costs were categorised as
exceptional due to the non-recurring nature of the event giving rise to them.
Exceptional administration expenses
Exceptional redundancy costs incurred in the prior year related to residual
costs of redundancy of employees within the Group's selling, general and
administrative ("SG&A") functions following the restructuring programme
announced in June 2020. The costs are net of savings achieved by the Group as
a result of decisions to retain employees, who had initially been notified of
redundancy. Due to the initial restructuring charge treatment as exceptional,
the reversal is similarly categorised as an exceptional item.
COVID-19 administrative costs in 2021 related to costs incurred in acquiring
personal protective and health screening equipment associated with the return
to work, and the costs of acquiring information technology equipment to be
used in the short-term during the COVID-19 lockdown. These costs were
categorised as exceptional in 2H 2020 and 1H 2021 due to the non-recurring
nature of the event giving rise to them. It is not expected that similar costs
would be treated as exceptional in the future, due to the normalisation of
operating conditions.
Exceptional profit on disposal of property, plant and equipment
The exceptional profit on disposal in 2021 related to the sale of the Group's
surplus property near Kingswinford. The profit on disposal has been
categorised as exceptional due to the materiality of the amount recorded.
Tax on exceptional items
2022
In the current year, the impairment charge relating to property, plant and
equipment is not tax deductible but gives rise to a deferred tax credit in the
current period.
The costs associated with the closure of sites are tax deductible in the
current period.
The profit on disposal of property, plant and equipment gave rise to a nil
chargeable gain in the current period due to the effect of indexation
allowance.
2021
In 2021, the reversal of impairment charges relating to property, plant and
equipment and right-of-use assets was not tax deductible but gave rise to a
deferred tax charge in the prior year.
The costs associated with the closure of sites, COVID-19 administrative
expenses and redundancy costs were tax deductible in the prior year.
The profit on disposal of property, plant and equipment gives rise to a
chargeable gain which was taxable in the prior year.
6. TAXATION
The Group recorded a taxation charge of £17.9 million (2021: £33.1 million)
on a pre-tax profit of £104.8 million (2021: pre-tax loss of £64.9 million),
resulting in an effective tax rate ("ETR") of 17.1% (2020: 51.0%).
Year ended 31 December 2022 Percentage Year ended 31 December 2021 Percentage
£'000
£'000
Profit before tax 104,764 100% 64,942 100%
Profit before tax multiplied by the rate of corporation tax in the UK 19,905 19.00% 12,339 19.00%
Effects of:
Expenses not deductible 771 0.74% 510 0.79%
Accounting profit on disposal of property, plant and equipment - - (333) (0.51%)
Permanent benefit of super-deduction on capital expenditure (1,741) (1.66%) (829) (1.28%)
Changes in estimates relating to prior periods (1,658) (1.58%) 66 0.10%
Adjusted ETR 17,277 16.50% 11,753 18.10%
Exceptional accounting profit on disposal of property, plant and equipment (1,488) (1.42%) (252) (0.39%)
Rate change on deferred tax provision 2,095 2.00% 21,628 33.30%
Total taxation expense from continuing operations 17,884 17.08% 33,129 51.01%
There are no income tax consequences for the Company in respect of dividends
declared prior to the date of authorisation of these financial statements and
for which a liability has not been recognised.
As part of the measures announced in the 2022 Autumn Statement, the Chancellor
of the Exchequer reinstated the previously cancelled increase in the standard
rate of corporation tax from 19% to 25% with effect from 1 April 2023. The
impact of this rate change was recognised in the previous year's financial
statements and gave rise to an increase in the Group's net deferred tax
liabilities of £21.6 million.
In the current period, the permanent benefit of the temporary enhancement to
tax relief on capital expenditure on plant and machinery, known as the
"super-deduction" was £1.7 million. This benefit is offset by an increase in
the associated deferred tax liability of £1.4 million being recognised at
25%, being the future tax rate at which it is expected to unwind.
The £2.1 million rate change on deferred tax provision is a result of
recognising deferred tax assets and liabilities at the future tax rate of 25%
in respect of items that are taxable or tax-deductible in the current
period. £1.4 million of this balance relates to capital expenditure that
has attracted the super-deduction as mentioned above.
In the current period, no capital gain arose in relation to the £7.0 million
profit on disposal of property, plant and equipment, resulting in a reduction
in the effective tax rate as shown in the table above.
The main reason for the income tax charge of £1.3 million arising on changes
in estimates relating to prior periods is due to a lower level of capital
expenditure qualifying for the super-deduction than originally estimated.
Tax relief on the capital expenditure will instead accrue over future
periods, thus giving rise to a £1.6 million prior year deferred tax credit.
The remaining £1.4 million of the deferred tax credit relates to the
correction of deferred tax overprovided in the prior year in relation to
tangible fixed assets.
The Group expects its effective tax rate in the future to be affected by the
outcome of any future tax audits as well as the impact of changes in tax law.
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:
Year ended 31 December 2022 Year ended
31 December 2021
(000s) (000s)
Basic weighted average number of Ordinary Shares 402,746 409,118
Effect of share incentive awards and options 2,010 1,494
Diluted weighted average number of Ordinary Shares 404,756 410,612
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:
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Profit for the period attributable to the parent shareholders 86,908 31,813
Less back exceptional items (Note 5) (6,278) (5,230)
(Less)/add back tax (credit)/charge on exceptional items (453) 695
Add fair value adjustments 12,126 10,132
Less tax credit on fair value adjustments (2,000) (1,834)
Less net non-cash interest (1,376) (606)
Add back tax expense on non-cash interest 227 110
Add back impact of deferred taxation rate change 2,095 21,628
Adjusted profit for the period attributable to the parent shareholders 91,249 56,708
Year ended 31 December 2022 Year ended 31 December 2021
pence pence
Basic EPS on profit for the year 21.6 7.8
Diluted EPS on profit for the year 21.5 7.7
Adjusted basic EPS on profit for the year 22.7 13.9
Adjusted diluted EPS on profit for the year 22.5 13.8
8. BORROWINGS
31 December 31 December
2022
2021
£'000 £'000
Current
Private Placement 436 333
436 333
Non-current
Private Placement 99,769 99,738
99,769 99,738
Total borrowings 100,205 100,071
During the final quarter of 2022, the group concluded a 12-month extension to
the £125 million RCF, extending maturity to November 2026 on terms aligning
with the original refinancing in November 2021. Fees of £0.3 million related
to this extension were capitalised.
The Group refinanced its debt facilities in the final quarter of 2021 repaying
the existing Revolving Credit Facility ("RCF") in November 2021 and expensed
the remaining capitalised arrangement fees of £0.7 million. This expense is
presented within finance costs in the consolidated income statement.
These facilities were replaced with the issuance of £100 million of Private
Placement notes from Pricoa Private Capital, with maturities of between 7 and
12 years and an average total cost of funds of 2.19% (range 2.04%-2.27%). An
additional uncommitted shelf facility of up to $88.1 million (or equivalent in
available currencies) was agreed. The facility contains debt covenant
requirements of leverage (net debt to adjusted EBITDA1) and interest cover
(adjusted EBITDA1 to net finance charges) of no more than three times and at
least four times, respectively, tested semi-annually on 30 June and 31
December in respect of the preceding 12-month period.
In November 2021 a £125 million RCF facility was provided by a syndicate of
five banks for an initial four year period, with a one year extension option.
Interest is charged at a margin (depending upon the ratio of net debt to
Adjusted EBITDA) of between 160bps and 260bps above SONIA, SOFR or EURIBOR
according to the currency of the borrowing. The facility also includes an
additional £50 million uncommitted accordion facility. Based on current
leverage the Group will pay interest under the RCF initially at a margin of
160bps. This facility contains debt covenant requirements that align with
those of the private placement with the same testing frequency.
The carrying value of financial liabilities have been assessed as materially
in line with their fair values.
No security is currently provided over the Group's borrowings.
9. PROVISIONS
31 December 31 December
2022
2021
£'000 £'000
Restoration (i) 4,550 4,749
Dilapidations (ii) 3,910 4,363
Restructuring (iii) - 100
Other (iv) 452 889
8,912 10,101
Current 1,613 1,869
Non-current 7,299 8,232
8,912 10,101
(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 over a period
exceeding 20 years. 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 similarly dated
UK Government bond rates.
(ii) Provisions for dilapidations arose as contingent liabilities recognised
upon the business combination in the period ended 31 December 2015, 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 at similarly lived UK Government bond rates.
(iii) The restructuring provision comprises obligations arising as a result of
the site closures and associated redundancy costs announced during the year
ended 31 December 2020 following the completion of the Group's review of
operations. The remaining cost is expected to be incurred within one year of
the current year 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.
10. IMPAIRMENT
2022
In the year, in light of the anticipated macroeconomic downturn and the
resulting projected decrease in activity levels across the UK construction
industry, Management identified possible indicators of impairment and
subsequently generated an estimate of the recoverable amounts based on value
in use for the Group's cash-generating units (CGUs).
Based on Management's projections, no reasonably possible change in key
assumptions within the value in use ("VIU") recoverable amount calculation
contained within the impairment calculation could cause the carrying value of
tangible assets to exceed its recoverable amount.
2021
The Group's announcements in April 2021 and November 2021 regarding the
capital expenditure projects at the Atlas and Nostell sites, respectively,
represent significant changes with a favourable effect on the assets held at
these sites, which were previously impaired. The site redevelopments at Atlas
and Nostell increased the estimated service potential from the use of certain
assets. The Group had estimated the recoverable amounts relating to these
assets and recognised an exceptional impairment reversal of £5.6 million in
the year ended 31 December 2021. This reversal arose within the Clay segment.
Additionally, the Group's decision to retain the leased Northwich
administrative facility within the Concrete segment triggered an impairment
reversal of £0.2 million to the related right-of-use asset.
Goodwill
Impairment testing was performed as at 31 December 2022 on the Group's
goodwill balance of £3.9 million, primarily relating to the acquisition of
the Longley CGU in July 2019. Based upon management's detailed testing of the
recoverable value of the CGUs to which goodwill is allocated, no impairment
was indicated.
For the Longley CGU, the key assumptions used within the testing of goodwill
included a pre-tax discount rate of 10.5%, together with a long-term growth
rate of 2%. The CGU-specific cash flows for the detailed five-year time period
used by management contain a revenue compound growth rate of 4.6%.
Based on management's projections, no reasonably possible change in key
assumptions within the value in use ("VIU") recoverable amount calculation
contained within the impairment calculation could cause the carrying value of
goodwill to exceed its recoverable amount.
11. NOTES TO THE GROUP CASHFLOW STATEMENT
Year ended 31 December 2022 Year ended 31 December 2021
Cash flows from operating activities £'000 £'000
Profit before taxation 104,764 64,942
Adjustments for:
Depreciation 31,579 31,409
Impairment of property plant and equipment 554 (5,623)
Impairment of right-of-use assets - (174)
Amortisation of intangible assets 6,939 6,940
Net finance costs 2,663 4,992
Gain on disposal of property, plant and equipment (6,541) (3,660)
Research and development expenditure credit (1,560) (1,673)
Share based payments 2,547 890
Post-employment benefits (973) (789)
Other (172) (87)
139,800 97,167
Increase in inventory (21,255) (9,435)
Increase in debtors (930) (2,617)
Increase in creditors 20,650 18,504
Decrease in provisions (500) (3,122)
Cash generated from operations 137,765 100,497
12. POST EMPLOYMENT BENEFITS
The Group participates in the Ibstock Pension Scheme (the 'Scheme'), a defined
benefit pension scheme in the UK. During the year ended 31 December 2022, the
opening Scheme surplus of £57.8 million decreased to a closing surplus of
£15.2 million. Analysis of movements during the year ended 31 December 2022:
£'000
Scheme surplus at 31 December 2021 57,754
Charge within operating profit (777)
Interest income 1,048
Remeasurement due to:
- Change in financial assumptions 211,786
- Change in demographic assumptions (1,701)
- Experience gains (18,844)
- Return on plan assets (235,822)
Company contributions 1,750
Scheme surplus at 31 December 2022 15,194
On 20 December 2022, the Scheme completed a full buy-in transaction with a
specialist third-party provider, which represented a significant step in the
Group's continuing strategy of de-risking its pensions exposure. This
transaction, together with the partial buy-in transaction in 2020 insures all
Group's defined benefit liabilities. As a result, the insured asset and the
corresponding liabilities of the Scheme are assumed to be fully 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 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 cover for current deferred pensioners at the date of the transaction
attracted a total buy-in premium of £175.6 million. The initial premium
payment of £81.3 million was settled on 28 December 2022 by the transfer of
certain Scheme-invested assets. The remaining premiums will be settled in
three instalments, with the final instalment expected to be paid by 20
December 2024. The deferred premia of £94.3 million with a present value of
£91.7 million have been recognised as negative assets against the Bespoke
cash flow-driven investment.
The difference between the buy-in premium and the IAS 19 liability for these
members has been taken through the consolidated statement of other
comprehensive income in the year ended 31 December 2022 as an asset loss of
£23.4 million.
The increased levels of short-term inflation during the year leading to
significant expected pension increase in deferment and payment to be awarded
in 2023. This has been offset by a significant actuarial gain arising on the
liabilities from a change in market conditions, particularly reflecting the
significant rise in corporate bond yields and therefore the discount rate over
2022.
The financial assumptions used by the actuary have been derived using a
methodology consistent with the approach used to prepare the accounting
disclosures at 31 December 2021. The assumptions have been updated based on
market conditions at 31 December 2022:
31 December 31 December
2022
2021
Per annum Per annum
Discount rate 4.80% 1.80%
RPI inflation 3.20% 3.40%
CPI inflation 2.60% 2.70%
Rate of increase in pensions in payment 3.75% 3.75%
Commutation factors 18.60 17.31
Mortality assumptions: life expectancy from age 65
For a male currently aged 65 21.9 years 21.8 years
For a female currently aged 65 24.5 years 24.5 years
For a male currently aged 40 23.6 years 23.6 years
For a female currently aged 40 26.4 years 26.3 years
Based on an existing funding agreement, a contribution level of £1.75 million
per annum has applied from February 2022, increasing to £2.0 million from 1
December 2023 and then to £2.25 million from 1 December 2024. Subsequently,
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 regular contributions with effect from 1 March 2023.
13. BUSINESS COMBINATION
On 29 July 2022, the Group acquired 75% of the share capital of Generix
Facades Limited. The acquired entity and its fully owned subsidiary Generix
Facades International Limited specialise in ventilated rainscreen facade
systems. The acquisition of the Generix business is complementary to the
Group's Futures operations and supports the further growth of the Futures
business.
Cash consideration of £1.0 million, was paid during the year ended 31
December 2022. Deferred consideration of £0.1 million is payable on the first
anniversary of completion.
In the acquisition, the Group acquired identifiable assets of £0.2 million
and goodwill of £0.9 million.
14. OTHER RESERVES
Cash flow hedging reserve Merger reserve Own shares held Treasury shares Total other reserves
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 (74) (369,119) (1,741) - (370,934)
Other comprehensive expense 492 - - - 492
Shares purchased - share buy back scheme (Note 12) - - - (30,000) (30,000)
Issue of own shares held on exercise of share options - - 152 - 152
At 31 December 2022 418 (369,119) (1,589) (30,000) (400,290)
-
Balance at 1 January 2021 - (369,119) (922) - (370,041)
Other comprehensive income (74) - - - (74)
Purchase of own shares - - (1,309) - (1,309)
Issue of own shares held on exercise of share options - - 490 - 490
At 31 December 2021 (74) (369,119) (1,741) - (370,934)
Cash flow hedging reserve
The cash flow hedging reserve records movements for effective cash flow hedges
measured at fair value. The accumulated balance in the cash flow hedging
reserve will be reclassified to the cost of the designated hedged item in a
future period.
Merger reserve
The merger reserve of £369.1 million arose on the acquisition of Figgs Topco
Limited by Ibstock plc in the period ended 31 December 2015 and is the
difference between the share capital and share premium of Figgs Topco Limited
and the nominal value of the investment and preference shares in Figgs Topco
Limited acquired by the Company.
Own shares held
The Group's holding in its own equity instruments is shown as a deduction from
shareholders' equity at cost totalling £1.6 million at 31 December 2022 (31
December 2021: £1.7 million). These shares represent shares held in the
Employee Benefit Trust to meet the future requirements of the employee share
based payment plans. Consideration, if any, received for the sale of such
shares is also recognised in equity with any difference between the proceeds
from sale and the original cost being taken to the profit and loss reserve. No
gain or loss is recognised in the income statement on the purchase, sale,
issue or cancellation of equity shares.
Treasury share reserve
The Treasury share reserve represents shares acquired by the Group as part of
its share buyback programme in 2022.
Commencing 10 May 2022, the Group engaged its brokers to purchase up to £30.0
million of shares on the open market on its behalf. These shares are held by
the Group to meet future requirements of employee share based payment plans.
At 31 December 2022, the Treasury shares reserve contained 16,791,470 shares.
15. RELATED PARTY TRANSACTIONS
There were no related party transactions nor any related party balances in
either the 2022 or 2021 financial years.
16. DIVIDENDS PAID AND PROPOSED
The Directors are proposing a final dividend in respect of the financial year
ended 31 December 2022 of 5.5 pence (2021: 5.0 pence) per Ordinary Share,
which will distribute an estimated £21.6 million (2021: £20.5 million) of
shareholders' funds. Subject to approval at the Annual General Meeting, this
will be paid on 12 May 2023, to shareholders on the register at the close of
business on 21 April 2023.
17. POST BALANCE SHEET EVENTS
In light of the fact that the Ibstock Pension Scheme was in a net surplus
position after the full pension buy-in, the Group and the Trustees of the
Ibstock Pension Scheme agreed on 27 February 2023 that the Group would suspend
regular contributions into the pension scheme with effect from 1 March 2023
(see Note 12).
Except for this pension contribution agreement and the proposed ordinary
dividend (see Note 16), no further subsequent events requiring either
disclosure or adjustment to these financial statements have arisen since the
balance sheet date.
1 (#_ftnref1) Alternative Performance measures are described in Note 3 to
this results announcement
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