TIDMIBST
RNS Number : 8409T
Ibstock PLC
27 July 2022
Interim results
27 July 2022
Ibstock plc
Interim results for the six months ended 30 June 2022
Strong first half performance gives confidence for the full
year;
good further progress with strategic initiatives
Ibstock plc ("Ibstock" or the "Group"), a leading UK
manufacturer of clay bricks and concrete products and solutions,
announces its results for the six months ended 30 June 2022.
Statutory results
---------------------------- ------------------------------------------------
Six months ended 30 2022 2021 Change %
June
---------------------------- -------- ---------- -------- --------- -----
Revenue GBP259m GBP202m +GBP57m +28%
-------- ---------- -------- --------- -----
Profit before taxation GBP51m GBP39m +GBP12m +32%
-------- ---------- -------- --------- -----
EPS 10.0p 2.7p +7.3p >100%
-------- ---------- -------- --------- -----
Interim dividend per
share 3.3p 2.5p +0.8p +32%
-------- ---------- -------- --------- -----
Adjusted results(1)
Six months ended 30 2022 2021 Change %
June
-------- ---------- -------- ---------
Adjusted EBITDA GBP71m GBP55m +GBP16m +29%
---------------------------- -------- ---------- -------- --------- -----
Adjusted EPS 11.3p 7.9p +3.4p +43%
---------------------------- -------- ---------- -------- --------- -----
Adjusted free cash flow GBP30m GBP23m +GBP7m +29%
---------------------------- -------- ---------- -------- --------- -----
Net debt GBP36m GBP53m GBP18m 33%
lower lower
============================ ======== ========== ======== ========= =====
+560
Return on Capital Employed 19.8% 14.2% bps +39%
---------------------------- -------- ---------- -------- --------- -----
Financial highlights
-- Strong first half performance, despite industry-wide inflation
and supply chain challenges, resulting in robust profit
and cash generation, and giving confidence for the full
year
o Robust demand in new build residential, RMI and infrastructure
markets
o Continued strong operational performance, with consistent
network reliability and tight focus on cost management
-- Revenue increased by 28% to GBP259 million (2021: GBP202
million), with strong volume growth supported from inventories,
alongside material pricing benefit
-- Adjusted EBITDA (1) up 29% to GBP71 million (2021: GBP55
million), with growth driven principally by clay performance,
reflecting a mid-single digit volume increase and good
margin management
-- Adjusted EBITDA (1) margins of 27.3% were 20bps ahead
of the prior year (2021: 27.1%) despite significant variable
cost inflation and after GBP1.5 million of operational
investment in Ibstock Futures and GBP4 million one-off
cost of living charge
-- Statutory profit before tax of GBP51 million (2021: GBP39
million) reflects strong first half trading performance
-- Return on Capital Employed (ROCE) (1) increased by 560bps
to 19.8% (2021: 14.2%), approaching Group's medium-term
target of 20%
-- Interim dividend increased by 32% to 3.3p per share (2021:
2.5p), reflecting the strong performance and the Board's
confidence in the Group's prospects
Strong momentum into H2 2022
-- Trading in the early weeks of the second half remains
encouraging, with resilient demand across end markets
-- Backed by strong forward order visibility, we expect good
year on year progress in H2, despite capacity slightly
below H1 due to phasing of planned shutdowns and some
inventory rebuild
-- Expect to maintain tight control of costs, and retain
our dynamic pricing strategy against a backdrop of ongoing
cost inflation
-- Energy price risk well mitigated with over 90% of energy
requirements for H2 2022 now secured and approaching 50%
secured for 2023
-- While mindful of broader macroeconomic uncertainties,
the Board now expects to deliver adjusted EBITDA (1) for
2022 modestly ahead of the expectations signalled at the
time of the AGM statement in April
Increasing confidence in the Group's longer term potential
-- Strong trading in H1 2022 demonstrates organic growth
momentum towards the Group's stated targets of revenues
>GBP600m and adjusted EBITDA (1) margin of at least 28%
by 2026
-- UK construction markets remain solidly underpinned over
the medium-term, with a structural housing deficit, healthy
mortgage availability and supportive government policy
-- Strategic growth initiatives progressing well:
o Capital enhancement projects in clay business now complete
- network capacity increased by 5% in line with expectations
o Atlas and Aldridge investment on track and now expected
to deliver annualised EBITDA (1) of GBP18 million (50%
above previous expectations) on capital cost of up to
GBP75 million, representing improvement vs original
ROCE (1) target
o Continued focus on ESG agenda with set of interim targets
and factory-level plans being established to drive progress
against our new strategic goals
-- Ibstock Futures continues to invest in leadership, innovation
and commercial capability and is progressing organic and
inorganic initiatives to accelerate the Group's entry
into fast growth construction product, solution and technology
markets; further bolt-on acquisitions under review
-- Balance sheet remains strong, with leverage below the
bottom end of the target range, after GBP11 million of
growth investments during H1 2022 and GBP6 million spent
on buying back shares
Joe Hudson, Chief Executive Officer, commented:
"I am very pleased with the Group's first half performance,
delivering profit and cash both significantly ahead of the prior
period, supported by sustained robust demand across all our end
markets and good operational execution.
"We continue to manage inflation and supply chain pressures well
and are making good progress with our strategic development plans,
with investments in new capacity progressing well, and good
momentum in Ibstock Futures, as we focus on the delivery of our
ambitious medium term financial targets.
"Our market backdrop remains encouraging in the early weeks of
the second half - demand is firm, asset utilisation is high and
industry inventories remain low - and the strong first half
performance gives us confidence in the full year outcome. We have a
clear strategy based on both core and diversified growth and will
continue to apply our dynamic and disciplined approach to capital
allocation.
"While we remain mindful of the broader macroeconomic
uncertainties, the Board now expects to deliver adjusted EBITDA (1)
for the full year modestly ahead of the expectations signalled in
April."
(1) Alternative Performance Measures are described in Note 3 to
the results announcement
Results presentation
Ibstock is holding a presentation at 10.30 today at 54 Hatton
Garden, London, EC1N 8HN.
Please contact ibstock@citigatedewerogerson.com to register your
in-person attendance.
A live webcast of the presentation will be available.
Please register here for the live webcast of the
presentation.
The presentation can also be heard via a conference call, where
there will be the opportunity to ask questions.
Conference Call Dial-In UK: +44 (0)330 165 4012
Details:
US: +1 323-701-0160
Confirmation code: 7335679
An archived version of today's webcast analyst presentation will
be available on http://www.ibstockplc.com later today.
Ibstock plc 01530 261 999
Joe Hudson, CEO
Chris McLeish, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith
Holly Gillis
About Ibstock plc
Ibstock plc is a leading UK manufacturer of clay bricks and a
diversified range of clay and concrete products and solutions. Its
principal products are clay bricks, brick components, concrete roof
tiles, concrete alternatives for stone masonry, concrete fencing
and pre -- stressed concrete products.
The Group's two divisions are:
Ibstock Clay: The leading manufacturer by volume of clay bricks
sold in the United Kingdom. With 16 manufacturing sites Ibstock
Brick has the largest brick production capacity in the United
Kingdom. It operates a network of 18 active quarries located close
to its manufacturing plants. Ibstock Kevington provides masonry and
pre-fabricated component building solutions, operating from 6 sites
across the United Kingdom.
Ibstock Concrete: A leading manufacturer of concrete roofing,
walling, flooring and fencing products, along with lintels and
general concrete building products, with 14 manufacturing plants in
the United Kingdom.
Forward-looking statements
This announcement contains "forward-looking statements". These
forward-looking statements include all matters that are not
historical facts and include statements regarding the intentions,
beliefs or current expectations of the directors. By their nature,
forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances that are difficult
to predict and outside of the Group's ability to control.
Forward-looking statements are not guarantees of future performance
and the actual results of the Group's operations. Forward-looking
statements speak only as of the date of such statements and, except
as required by applicable law, the Group undertakes no obligation
to update or revise publicly any forward-looking statements.
Chief Executive's Review
Introduction
I am very pleased to report a strong performance for the first
half of the year, with both profit and cash significantly ahead of
the prior period. Trading was robust, supported by strong demand
across our new build residential, Repairs, Maintenance and
Improvement (RMI), and infrastructure markets, alongside solid
operational execution. While industry supply chains remained
challenging and inflationary pressures intensified during the
period, the business has continued to manage these challenges
well.
Looking forward, our markets remain solidly underpinned over the
medium-term, with a structural housing deficit, healthy mortgage
availability and supportive government policy. Industry brick
inventories remain at historically low levels, with the market
having to rely on imported bricks due to the constraints on UK
capacity. Overall, having made a strong start to 2022, the robust
operational backdrop provides confidence in achieving our ambitious
medium term targets.
The Group also made good further progress across all three of
its strategic pillars: Sustain; Innovate; and Grow.
Across the Group, commercial performance was strong, with both
volume and price contributing to significant year on year revenue
growth. Consistent reliability and efficiency was achieved across
the plant network, with output in line with expectations, despite
experiencing some supply chain challenges, particularly in the
early part of the period. We saw significant variable cost
inflation, particularly in energy, materials and freight, and have
been successful in recovering this fully through increases in
selling price.
Our investment in the redevelopment of our wire-cut clay brick
facilities in the West Midlands remains on track, with
commissioning expected from the end of 2023. When complete, the new
state-of-the-art factory at our Atlas site will manufacture the
UK's first net-zero carbon bricks. We are now well progressed with
the tendering and procurement programme for the project and have
continued to develop our operational plans for the factories. We
now expect the project to deliver significantly higher annualised
adjusted EBITDA (1) of GBP18 million from 2025 (compared to GBP12
million initially) with a capital cost of up to GBP75 million
(compared to GBP60 million initially), representing an improved
ROCE (1) compared to the original project target.
Ibstock Futures continued to build momentum as we invested in
the strength and capability of the core team, whilst making good
progress in developing the pipeline of both organic and inorganic
growth initiatives. We completed a small asset acquisition in
January 2022 providing a strong position within glass reinforced
concrete (GRC) panel technology, supplied into a wide range of
façade applications. We also continued to make progress towards the
development of our new brick slip systems factory in Nostell,
Yorkshire. Futures remains focused on accelerating the Group's
entry into a number of fast-growth product, solution and technology
markets created by the evolution of the construction sector.
Our commitment to environmental sustainability and social
progress represents a strong unifying cause for everyone at
Ibstock. We maintained focus on all areas of our ESG agenda during
the first half, with the new strategic framework and targets
announced in late 2021 providing a pathway to reduce carbon
emissions by 40 per cent by 2030, against a 2019 baseline, and be
net zero carbon by 2040. A central pillar of our social agenda is
our commitment to develop and support our people, and to maintain a
strong workforce with the capability to deliver our strategic
objectives for the long term. In response to the challenges our
colleagues are facing with the sharply elevated costs of living, we
have committed to make a one-off payment to those employees most
heavily impacted during the second half of the 2022 year,
representing a total cost of around GBP4 million recognised during
the first half.
In line with our dynamic capital allocation framework, we
initiated a GBP30 million share buyback during the first half of
2022, purchasing around three and a half million shares by 30 June
2022. In light of our strong performance, and the Board's
confidence in the Group's position and prospects, we have increased
the interim dividend by 32% to 3.3p per share (2021: 2.5p).
As we set out in March 2022, our strong financial position,
which is supported by significant ongoing cash generation, provides
us with a platform to deliver attractive growth and shareholder
returns into the future.
Financial Performance
The results for the first half year demonstrate a marked
improvement on the same period in the prior year, with all of our
key financial metrics showing significant progress. Sales of GBP259
million were 28% up on 2021 (GBP202 million) and materially ahead
of the pre-COVID performance reported in 2019, as the Group
benefitted from a combination of robust demand and strong
commercial execution. Industry-wide supply chain challenges were
well managed and we continued to mitigate the impact of
inflationary pressures on our cost base through a dynamic
commercial approach in both divisions. Adjusted EBITDA (1) grew 29%
to GBP71 million (2021: GBP55 million), primarily as a result of
the strong performance in the Clay division.
Adjusted EBITDA (1) margins of 27.3% were ahead of the prior
year (2021: 27.1%), reflecting good cost management and the
benefits of our dynamic pricing approach. Statutory earnings per
share rose by 7.3 pence to 10.0 pence (2021: 2.7 pence).
Our balance sheet remains strong, with net debt reduced to GBP36
million (June 2021: GBP53 million; December 2021: GBP39 million).
Reflecting good progress against our strategic objectives, we
invested GBP11 million in growth initiatives in the period, and
expect capital expenditure to accelerate during the second half,
bringing full year growth capital expenditure closer to our
original expectation of around GBP50 million.
Leverage at 30 June 2022 was below the bottom end of our target
range, reflecting the robust trading performance and good working
capital management, with net debt to adjusted EBITDA (1) of 0.3
times (30 June 2021: 0.6 times).
Return on Capital Employed (1) (ROCE) increased by 560 bps to
19.8% (2021: 14.2%), approaching our medium-term target of at least
20%.
Divisional Review
Ibstock Clay
Core business
Our core Clay business had a strong first half, with very good
execution against a backdrop of continued robust demand. Consistent
reliability and efficiency across the plant network meant that we
achieved the anticipated increase in network output in line with
our expectations, with fixed costs well controlled in the context
of the inflationary backdrop. Sales volumes increased by mid-single
digits compared to the comparative period, reflecting strong
factory output and some draw down on inventories during the period.
The division continued to benefit from the actions taken to reduce
its fixed cost base in the second half of 2020.
Supply chain conditions remained challenging, although the
business continued to mitigate these issues effectively with
limited impact on operational performance. Significant inflation
across the key variable cost areas of energy, freight, carbon and
materials was recovered by selling price increases, with in-year
energy price inflation addressed through a dynamic quarterly
pricing approach.
Divisional revenue grew by 34% to GBP186 million in the first
half (2021: GBP138 million), with volume growth in every major
channel. Adjusted EBITDA (1) totalled GBP64 million in 2022, (2021:
GBP47 million), reflecting strong sales volumes, firm pricing and
good cost management.
Adjusted EBITDA margins in Clay were 34.7%, ahead of the
comparative period (H1 2021: 34.1%). The current period included a
charge of around GBP2.5 million relating a one-off cost of living
payment.
Ibstock Futures
In November 2021 the Group announced the formation of Ibstock
Futures ("Futures"), a business unit established to capture
opportunities in new, fast growth sectors of the construction
market.
The development of Futures is progressing well under the
leadership of its Managing Director, Jeremie Rombaut, and the
business is continuing to build strength and capability in its
team. In early 2022, Futures acquired the assets of Telling GRC, a
small specialist in glass reinforced concrete (GRC) panel
technology. The integration of this business into the Group is
progressing well and first half performance was in line with our
expectations.
We remain focused on accelerating the Group's penetration into a
number of fast-growth product, solution and technology markets
created by the evolution of the construction sector, and continue
to progress a number of attractive organic and inorganic growth
projects. Having completed the Telling GRC asset acquisition,
Futures' pipeline of M&A opportunities has continued to build,
with a range of potential targets under review that have the
ability to accelerate the business' development and entry into
attractive niche market segments. Our project to use existing clay
reserves to produce a cementitious replacement continue to progress
well, and we expect to move from the research to development phase
during the second half of the 2022 year.
Demand in the brick slips market continues to build,
underpinning the opportunity for Futures in what will be a key
product category for the business as it develops its strong
pipeline of commercial opportunities. In light of the encouraging
near term demand outlook, we are actively exploring ways to
accelerate our network capacity build for brick slips ahead of the
Nostell factory coming on stream.
We continue to expect operational investment of around GBP4
million in 2022 within Ibstock Futures, with around GBP1.5 million
incurred in the first half as the business invested in research and
development, and in building in-house innovation and commercial
capability.
Ibstock Concrete
Concrete delivered a solid performance in the first half as it
continued to benefit from its exposure to a broad range of
residential and infrastructure markets, and resilient demand for
its products.
Divisional revenue in the period grew by 16% to GBP74 million
(2021: GBP64 million), driven by a material pricing benefit.
Overall, sales volumes were in line with the comparative period, as
growth within fencing, walling and rail infrastructure was offset
by lower volumes of roof tiles, as operational challenges held back
output at our roof tile factory in Leighton Buzzard.
Adjusted EBITDA (1) totalled GBP11 million in 2022, (2021: GBP12
million), with adjusted EBITDA (1) margins of 15.3% below the
comparative period (H1 2021: 18.5%). This reduction reflected
incremental costs of around GBP1 million in our roofing factory and
the divisional impact of the one-off cost of living payment
totalling around GBP1.5 million. We expect the concrete adjusted
EBITDA (1) margin percentage to move towards our medium-term
ambition for the division during the second half.
Strategic Update
During 2021 the Group set out a clear path for significant
growth and value creation over the medium term, with the generation
of substantial further capital to support both incremental
investment and additional shareholder returns.
Set against this ambition, at the beginning of 2022 we announced
a set of medium-term financial targets:
-- Grow Group revenues to in excess of GBP600 million
by 2026
-- Medium term profitability targets:
-- Adjusted EBITDA (1) Margins in Clay business
of >35%
-- Overall Group margins of at least 28%
-- Revenues outside of traditional clay brick to represent
>40% of the Group (from c.30% in 2021)
-- Retaining our capital discipline with ROCE (1) of
>20% into the medium term
We expect the construction market to continue to evolve,
adopting more sustainable and industrialised processes, practices
and products. We are focused on ensuring that we maximise our
opportunities in this developing market, which we believe will
drive longer term growth and strong financial performance for the
Group.
Our operational strategy is defined across three pillars:
Sustain, Innovate and Grow. These are detailed further below.
Sustain
As a scale industrial business, sustainable high performance is
at the heart of what we do. We are focused on three priorities:
health and safety; operational excellence; and environmental
performance.
Health and safety: T he health, safety and wellbeing of our
employees is always our first priority and our six safety rules
guide our actions and behaviours across the enterprise.
In the period, we delivered further improvements in all areas of
our health and safety roadmap, with particular emphasis on safety
procedures for contractors, and the embedding of enhanced safety
practices into our quarry locations. The Group is on track to meet
its 2023 target of a 50% reduction in Lost Time Injury Frequency
Rate ("LTIFR") with a further reduction achieved in the first
half.
Whilst continuing to prioritise physical health and safety at
all locations, we are also increasing our focus on the promotion of
mental health and wellbeing across our organisation, with a number
of important developments during the first half of the year. We
rolled out a comprehensive programme of workshops to upskill all
managers, ran our first enterprise campaign to coincide with Mental
Health Awareness Week in May 2022, and established a network of
Health & Wellbeing working groups across the business.
Overall, we remain committed to driving our business to zero
harm for everyone.
Operational excellence
The Group's operational performance was robust during the first
half of 2022 as we benefitted from the full commissioning of our
capital enhancement projects at the SM2, Laybrook and Ellistown
factories. These projects, which are now completed, have added 5%
to the clay network capacity. We also continued to enhance our
preventative maintenance programme across all sites, which is
central to ensuring the efficient, long run performance of our
networks.
Environmental performance
Having announced our 2030 ESG Strategy during the first half,
momentum has gathered pace across the Group. Across our businesses,
at an individual site level, our teams have been working to
establish actionable plans which will deliver our targeted 40%
carbon reduction by 2030 against the 2019 baseline.
While carbon reduction is the most material positive
environmental impact Ibstock can make, we remain committed to
reducing the impacts of our operations on the environment, more
generally and we were pleased to deliver a substantive reduction in
plastic usage during the period, now down by greater than 30%
compared with 2019.
Innovate
Innovation is at the heart of our growth plans, and we are
committed to the continuing enhancement of our product portfolio
and customer proposition to strengthen our market-leading
positions. Our initiatives are centred on three specific areas:
product innovation; customer experience; and digital
transformation.
Product innovation
As market leader in clay and concrete products, we have the
broadest range of products and systems available in the UK, and we
continue to invest to enhance our proposition. A number of new
products were launched during the period including: Fire Rated
Lintels within our Concrete division, which offer superior safety
qualities; and our new R mian Range within the Clay division, which
has been designed to meet the growing demand for heritage and
reclaimed style soft mud bricks with natural colours and
textures.
In support of our carbon reduction ambitions, product
innovations during the period at two key brick factories have
enabled us to reduce raw material consumption without affecting
product technical or aesthetic performance. These innovations,
focused on perforation size and configuration, which have reduced
over 1,000 tonnes of carbon, will be rolled out across other parts
of our network in the months ahead.
Customer experience
We continue to find ways to enhance the experience of our
customers at every stage of their engagement with us. Against a
backdrop of global supply chain challenges, we have taken steps to
strengthen our nationwide distribution capability through the
addition of new h aulage partners to our distribution fleet. In
addition to improving the service for our customers, this
diversification has reduced execution risk across our business.
Alongside this change, we have significantly upgraded our order
management and delivery scheduling processes, to drive down order
cancellation rates, whilst providing greater certainty for
customers.
Digital transformation
The digitalisation of our business will be a key strategic
enabler over the coming years as we look to drive an increasing
proportion of our sales activity through digital channels. The
digital sales platform trialled last year in parts of our Concrete
division is being scaled up across many other product categories
across the whole business later this year, driving greater
automation of order management and order fulfilment for our
customers.
Grow
The Group's growth strategy is based on a combination of
continued development of its core business and effective
diversification into attractive new segments of the construction
market. The strategy is being supported by targeted investment
projects and acquisitions which create value and accelerate
delivery.
Investment in the core
Within the Clay business, our enhancement projects are now
complete, ensuring that clay network capacity increased by 5%, in
line with our expectations. The Atlas and Aldridge redevelopments
are on track to be commissioned from the end of 2023, which will
collectively increase capacity by around 115 million bricks. The
commissioning of the Atlas facility will mark a key milestone for
Ibstock and the industry, as the UK's first net-zero brick
factory.
Diversified growth
The formation of Ibstock Futures provides a focus for our
strategic aspirations to grow through the introduction of products,
solutions and technology, designed to support, and benefit from,
the megatrends of sustainability and the industrialisation of
construction methods. With a strong team in place, and a clear
pipeline of attractive growth opportunities, we are well placed to
take a leadership position in fast growing sectors of the
construction market.
People
Our people will always be our most important asset, and as an
organisation, we are seeking to create a culture driven by
performance and led by our values. Developing our people is of
vital importance, and during the period we introduced an enterprise
learning hub through which all our people across the business can
access training spanning a wide range of content.
We are passionate about fostering an inclusive culture through
which our people feel trusted, valued and empowered. We are also
committed to promoting diversity, in all its forms, and have, in
recent months, introduced a diversity charter and upskilled our
leaders across the business through the provision of diversity
training.
Summary and outlook
The business performed strongly in the first half despite
industry-wide supply chain and inflationary challenges, delivering
a significantly improved year-on-year result. This performance was
underpinned by solid operational execution, and a clear focus on
the strategic priorities necessary to achieve our ambitious medium
term financial targets.
Looking ahead, industry fundamentals remain robust, with strong
near-term demand, high levels of asset utilisation and low product
inventories. We have a clear strategy based on both core and
diversified growth initiatives, underpinned by our strong financial
position and dynamic approach to capital allocation.
Trading in the early weeks of the second half has remained
encouraging, and this positive momentum provides us with a strong
platform to deliver significant further financial and strategic
progress. Given this momentum and our strong forward order
visibility, we expect good year on year progress in H2, despite
capacity being slightly lower than in H1 due to the seasonal
weighting of planned factory shutdowns to the second half as well
as the plan to build back inventory levels.
Whilst we remain mindful of the broader macroeconomic
uncertainties, the Board now expects adjusted EBITDA (1) for 2022
to be modestly ahead of the previous expectations signalled at the
time of the AGM trading statement in April.
(1) Alternative Performance Measures are described in Note 3 to
the results announcement
Chief Financial Officer's report
Introduction
The Group delivered a strong trading performance in the first
six months of 2022, reflecting both robust market demand and solid
operational performance. The dynamic commercial approach taken in
both the Clay and Concrete divisions was successful in recovering
significant cost inflation. A continued intense focus on cost
management ensured that Group adjusted EBITDA (1) margin percentage
was ahead of the prior year on a materially higher top line, and
after around GBP1.5 million of incremental operational investment
in Ibstock Futures.
The Group also delivered an excellent cash flow performance,
reflecting strong trading and disciplined capital management. This
performance was instrumental in strengthening further the Group's
balance sheet, with closing net debt (1) of GBP36 million at 30
June 2022 representing leverage (1) of 0.3 times (2021: 0.6
times).
As part of our dynamic and disciplined capital allocation
strategy, as well as completing a small bolt-on asset acquisition
in the period, we initiated a share buy-back which is expected to
return GBP30 million to shareholders during the 2022 year. With our
strong financial position, and inherently cash generative business,
we expect to have significant further cash available to support
growth investment and shareholder returns over the medium-term.
Climate Change & TCFD
We have an ambition to be the most sustainable manufacturer of
clay and concrete products in the UK, and to lead our sector in the
disclosure and transparency around Environmental, Social and
Governance (ESG) issues. We have invested significant capital over
the last decade, with investment projects across the Group's plant
network contributing to a reduction in the carbon intensity of our
manufacturing processes. Our new strategic framework and targets
announced in late 2021 provide a pathway to reduce carbon emissions
by 40 per cent by 2030, against a 2019 baseline, and be net zero
carbon by 2040. We continue to actively monitor the transitional
and physical risks of climate change through our risk management
process.
Alternative performance measures
This results statement contains alternative performance measures
("APMs") to aid comparability and further understanding of the
financial performance of the Group between periods. A description
of each APM is included in Note 3 to the financial statements. The
APMs represent measures used by management and the Board to monitor
performance against budget, and certain APMs are used in the
remuneration of management and Executive Directors. It is not
believed that APMs are a substitute for, or superior to, statutory
measures.
Group results
The table below sets out segmental revenue and adjusted EBITDA
(1) for the year
Clay Concrete Central Total
costs
GBP'm GBP'm GBP'm GBP'm
------- --------- -------- -------
Six-month period ended
30 June 2022
Total revenue 185.5 73.8 - 259.3
------- --------- -------- -------
Adjusted EBITDA(1) 64.4 11.3 (5.0) 70.7
======= ========= ======== =======
Margin 34.7% 15.3% 27.3%
Six-month period ended
30 June 2021
Total revenue 138.3 63.8 - 202.0
------- --------- -------- -------
Adjusted EBITDA(1) 47.2 11.8 (4.2) 54.8
======= ========= ======== =======
Margin 34.1% 18.5% 27.1%
(1) Alternative Performance Measures are described in Note 3 to
the results announcement
Due to rounding, numbers presented may not add up precisely to
the totals provided and percentages may not precisely reflect the
absolute figures
The activities of the new Ibstock Futures business unit have
been reported within the Clay segment since this is the basis upon
which performance is reported to the Chief Operating Decision
Maker.
Revenue
Group revenue for the six months ended 30 June 2022 totalled
GBP259.3 million (2021: GBP202.0 million ), an increase of 28%.
Performance ref lected a robust t rading environment, with strong
demand across our new build residential, RMI and infrastructure
markets, coupled with good commercial execution.
Within Clay, revenues of GBP185.5 million represented an
increase of 34% on 2021 revenues of GBP138.3 million. Volumes
increased by mid-single digits, modestly ahead of our expectations,
supported by a small reduction in inventories. Material cost
inflation was recovered through proportionate price increases, with
in-year energy cost increases addressed through a dynamic quarterly
pricing approach. The new Telling GRC business contributed revenue
of around GBP2 million, and a breakeven adjusted EBITDA (1) result,
during the first half.
Within Concrete, revenues of GBP73.8 million were 16% above the
comparative period (2021: GBP63.8 million), as volume growth in the
product categories of fencing, walling and rail infrastructure was
largely offset by lower volumes of roof tiles. Overall, sales
volumes were broadly in line with the comparative period, with a
material price benefit largely mitigating double-digit year-on-year
cost inflation.
Adjusted EBITDA (1)
Management measures the Group's operating performance using
adjusted EBITDA (1) . Adjusted EBITDA (1) increased materially year
on year to GBP70.7 million in 2022 (2021: GBP54.8 million).
Within the Clay division, adjusted EBITDA (1) totalled GBP64.4
million (2021: GBP47.2 million), representing an EBITDA (1) margin
of 34.7% (2021: 34.1%). The adjusted EBITDA (1) increase over 2021
reflected a combination of significant volume and pricing benefits,
combined with solid operational performance and disciplined cost
management. The adjusted EBITDA (1) margin percentage grew by
around 60 basis points, despite the impact of around GBP1.5 million
of incremental operational investment within Ibstock Futures, and a
charge of around GBP2.5 million relating to a one-off cost of
living payment.
Adjusted EBITDA (1) in Concrete decreased to GBP11.3 million
(2021: GBP11.8 million), with operational challenges affecting
reliability and throughput at our roofing factory in Leighton
Buzzard. Adjusted EBITDA (1) margins of 15.3% were below 2021
margins of 18.5%, reflecting slightly higher costs in roofing and
the impact of the cost of living payment.
Central costs increased to GBP5.0 million (2021: GBP4.2
million), reflecting higher variable remuneration costs.
Exceptional items (1)
Based on the application of our accounting policy for
exceptional items (1) , certain expense items have been excluded in
arriving at adjusted EBITDA (1) to aid shareholders' understanding
of the Group's underlying financial performance.
The amounts classified as exceptional (1) in the period totalled
a net cost of GBP0.8 million (2021: gain of GBP5.4 million),
comprising the final costs associated with the Group's closure of
sites as part of its single co-ordinated restructuring plan.
Further details of exceptional items (1) are set out in Note 5 of
the financial statements.
Finance costs
Statutory net finance income of GBP0.1 million in the period
compared to a cost of GBP2.0 million in the comparative period,
reflecting reduced financing charges coupled with an interest
credit arising on the increased discounting of provisions.
Profit before taxation
Group statutory profit before taxation for the period was
GBP51.2 million (2021: GBP38.8 million), reflecting stronger
trading.
Taxation
The Group recorded a taxation charge of GBP10.4 million (2021:
GBP27.9 million) on Group pre-tax profits of GBP51.2 million (2021:
GBP38.8 million), resulting in an effective tax rate (ETR) of 20.3%
(2021: 71.7%) compared with the standard rate of UK corporation tax
of 19%. The 2021 statutory tax charge and ETR reflected the
restatement of the Group's net deferred tax liabilities following
the rate change announced in the 2021 Budget that will see the
standard rate of UK corporation tax increase from 19% to 25% from 1
April 2023.
The adjusted ETR (1) (excluding the impact of the deferred tax
rate change) was 17.4% (2021: 17.6%), which included the permanent
benefit of the UK tax super-deduction on qualifying capital
expenditure also announced in the 2021 budget.
Earnings per share
Group statutory basic earnings per share (EPS) increased
significantly to 10.0 pence in the six months to 30 June 2022
(2021: 2.7 pence) principally because of the Group's increased
profit before taxation and the materially lower statutory tax
charge.
Group adjusted basic EPS (1) of 11.3 pence per share also
increased significantly from 7.9 pence in the comparative period,
reflecting the increased adjusted EBITDA (1) achieved in the year.
In line with prior years, our adjusted EPS (1) metric removes the
impact of exceptional items (1) , the fair value uplifts resulting
from our acquisition accounting and non-cash interest impacts, net
of the related taxation charges/credits. Adjusted EPS (1) has been
included to provide a clearer guide as to the underlying earnings
performance of the Group. A full reconciliation of our adjusted EPS
(1) measure is included in Note 7.
Table 1: Earnings per share
2022 2021
pence pence
========================== ======= =======
Statutory basic EPS -
Continuing operations 10.0 2.7
========================== ======= =======
Adjusted basic EPS (1)
- Continuing operations 11.3 7.9
========================== ======= =======
Cash flow and net debt (1)
Adjusted free cash flow (1) increased by GBP6.8 million in the
year to GBP30.2 million (2021: GBP23.4 million) primarily
reflecting the increase in adjusted EBITDA (1) compared to 2021,
partly offset by increased capital spend on our growth investments,
with the cash conversion cycle also continuing to benefit from the
Group's strong focus on working capital management.
Tax payments in 2022 totalled GBP0.8 million (2021: GBP4.0
million), benefiting from the UK tax super-deduction claimed on
qualifying capital expenditure. Other cash outflows of GBP8.0
million (2021: GBP4.6 million) included amounts totalling GBP4
million in respect of carbon emission credits purchased during the
period (2021: GBPnil).
The Cash conversion (1) percentage increased to 69% (from 61% in
2021).
Table 2: Cash flow (non-statutory)
2022 2021 Change
==========================
GBP'm GBP'm GBP'm
========================== ======= ======= =======
Adjusted EBITDA (1) 70.7 54.8 16.0
-------------------------- ------- ------- -------
Adjusted change in
working capital (1) (10.5) (9.9) (0.6)
-------------------------- ------- ------- -------
Net interest (1.6) (1.9) 0.3
-------------------------- ------- ------- -------
Tax (0.8) (4.0) 3.2
-------------------------- ------- ------- -------
Post-employment benefits (0.9) (0.9) -
-------------------------- ------- ------- -------
Other (2) (8.0) (4.6) (3.4)
========================== ------- ------- -------
Adjusted operating
cash flow (1) 49.0 33.5 15.5
-------------------------- ------- ------- -------
Cash conversion (1) 69% 61% +8ppts
-------------------------- ------- ------- -------
Total capex (18.8) (10.1) (8.7)
========================== ------- ------- -------
Adjusted free cash
flow (1) 30.2 23.4 6.8
========================== ======= ======= =======
(1) Alternative Performance Measures are described in Note 3 to
the consolidated financial statements.
(2) Other includes operating lease payments in both years and
emission allowances purchases in 2022
The table above excludes cash flows relating to exceptional
items (1) in both years.
The increase in working capital (1) of GBP10.5 million in the
first half reflected both the uplift in selling prices and
inflation in unit costs, which increased the value of trade
receivables and inventory respectively during the period.
Capital expenditure of GBP18.8 million in the period (2021:
GBP10.1 million) comprised: sustaining spend of around GBP8
million; spend on the organic growth investments of around GBP10
million; and GBP1 million in respect of a small asset acquisition
in Ibstock Futures. We expect capital expenditure to accelerate
during the second half, bringing full year growth investments
closer to our original expectation of around GBP50 million.
Net debt (1) (borrowings less cash) of GBP35.7 million at 30
June 2022 compared to GBP53.5 million at 30 June 2021 and GBP38.9
million at 31 December 2021, reflecting the continued benefit of
strong operating cash flows throughout the first half.
Following the refinancing of our debt facilities in the final
quarter of 2021, the Group has GBP100 million of private placement
notes with maturities of between seven and twelve years at a total
fixed coupon of just over 2% and a GBP125 million RCF with a group
of five banks with an initial four year tenor (and a one year
extension option). The RCF remained undrawn at 30 June 2022. This
funding structure continues to provide efficient long-term
financing at attractive rates of interest.
Return on capital employed (1)
Return on capital employed (1) (ROCE) in 2022 increased
materially to 19.8% (2021: 14.2%). The substantial improvement
compared to the prior year reflected both a significant increase in
adjusted operating profit, as well as a modest reduction in the
capital base, as both working and fixed capital were well
managed.
Capital allocation
The Group's capital allocation framework remains consistent with
that laid out in 2020, with the Group remaining committed to
allocating capital in a dynamic and disciplined way.
Our capital allocation framework is set out below:
-- Firstly, we will invest to maintain and enhance our existing
asset base and operations;
-- Having done this, we will look to pay an ordinary dividend,
setting targeted cover of approximately 2 times underlying
earnings;
-- Thereafter, we will deploy capital for growth, both inorganically
and organically, in accordance with our strategic and
financial investment criteria;
-- And, finally, we will return surplus capital to shareholders
.
Our framework remains underpinned by our commitment to
maintaining a strong balance sheet, and we will look to maintain
leverage at between 0.5 and 1.5 times net debt (1) to adjusted
EBITDA (1) excluding the impact of IFRS 16, through the cycle.
As part of our disciplined approach to capital allocation,
during the first half we announced a share buyback programme of up
to GBP30 million. As at 30 June 2022, we had purchased 3.5 million
shares for cash of around GBP6 million, representing around 20% of
the programme.
We expect to deploy significant growth capital in the business
during the balance of year and beyond, with a growing pipeline of
both organic and inorganic opportunities. The Board continues to
expect capital to be generated in excess of that required for its
investment requirements and remains committed to returning surplus
capital to shareholders as part of its dynamic and disciplined
capital allocation strategy.
Dividend
In light of the Group's financial position and prospects, an
interim dividend of 3.3 pence per ordinary share (2021: 2.5 pence)
will be paid on 13 September 2022 to shareholders on the register
on 19 August 2022.
Pensions
At 30 June 2022, the defined benefit pension scheme ("the
scheme") was in an actuarial accounting surplus position of GBP56.2
million (31 December 2021: surplus of GBP57.8 million; 30 June
2021: surplus of GBP42.5 million). At 30 June 2022, the scheme had
asset levels of GBP475.1 million (31 December 2021: GBP618.0
million; 30 June 2021: GBP601.9 million) against scheme liabilities
of GBP418.9 million (31 December 2021: GBP560.3 million; 30 June
2021: GBP559.4 million).
The slight reduction in balance sheet surplus over the period
was primarily due to an increase in near-term levels of inflation,
substantially offset by a reduction in the scheme liabilities
arising from a higher discount rate, as detailed in Note 11.
A contribution level of GBP1.75 million per annum continues to
apply, expected to increase to GBP2.0 million from 1 December 2023
and then to GBP2.25 million from 1 December 2024.
The Group continues its work with the scheme Trustees to explore
steps to further de-risk the pension scheme, and to pursue its
investment strategy of matching asset categories with the
associated liabilities.
Related party transactions
Related party transactions are disclosed in Note 13 to the
consolidated financial statements. During the current and prior
year, there have been no material related party transactions.
Subsequent events
Other than the interim dividend declared by the Directors there
have been no events since the balance sheet date requiring
disclosure or adjustment to these financial statements.
Going concern
The Directors are required to assess whether it is reasonable to
adopt the going concern basis in preparing the financial
statements.
In arriving at their conclusion, the Directors have given due
consideration to whether the funding and liquidity resources are
sufficient to accommodate the principal risks and uncertainties
faced by the Group.
Having considered the outputs from this work, the Directors have
concluded that it is reasonable to adopt a going concern basis in
preparing the financial statements. This is based on an expectation
that the Company and the Group will have adequate resources to
continue in operational existence for at least twelve months from
the date of signing these accounts.
Further information is provided in note 2 of the financial
statements.
Principal Risks and Uncertainties
This section should be read in conjunction with the rest of this
Half Year Statement as this provides further information concerning
those important events that have occurred during the first six
months of the financial year.
The Group's activities expose it to a variety of risks including
climate change, material operational disruption, market
uncertainty, anticipating product demand, financial risk
management, regulatory and compliance, maintaining customer
relationships and market reputation, people and talent management,
product quality, cyber and information security, and major project
delivery. The Board assesses and monitors the key risks impacting
the business and an explanation of the Group's approach to risk
management is set out in Ibstock plc's Annual Report 2021, a copy
of which is available on the Group's corporate website,
www.ibstockplc.co.uk .
Having completed the review of principal risks for the Half Year
2022, the Board has concluded that despite industry-wide inflation,
supply chain challenges and broader macro-economic conditions, due
to the Group's dynamic price management strategy and mitigation of
energy price risk, the Group's existing principal risks and
uncertainties remain unchanged from those set out in its 2021
Annual Report.
A full report on the Group's principal risks will be included
with the FY 2022 annual report and accounts. The Board will
continue to monitor the Group's principal risks during the
remaining six months of the year, with a focus on financial risk
management and major project delivery.
Statement of directors' responsibilities in relation to the
half-yearly financial report
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial reporting
as contained in UK-adopted IFRS;
-- The interim management report includes a fair review of
the information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules,
being an indication of important events that have occurred
during the first six months of the financial year; and
a description of the principal risks and uncertainties
for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules,
being related party transactions that have taken place
in the first six months of the current financial year
and that have materially affected the financial position
or performance of the entity during that period; and
any changes in the related party transactions described
in the last annual report that could do so.
By order of the Board:
Joe Hudson Chris McLeish
Chief Executive Chief Financial
Officer Officer
26 July 2022 26 July 2022
Condensed consolidated income statement
for the six months ended 30 June 2022
Unaudited Unaudited Audited
Notes Half year Half year Year ended
ended 30/06/2022 ended 30/06/2021 31/12/2021
------ ------------------ ------------------ ------------
GBP'000 GBP'000 GBP'000
Revenue 4 259,313 202,041 408,656
Cost of sales before exceptional items (158,728) (130,041) (267,662)
Exceptional cost of sales 5 (756) 3,501 3,495
-------------------------------------------- ------ ------------------ ------------------ ------------
Cost of sales (159,484) (126,540) (264,167)
-------------------------------------------- ------ ------------------ ------------------ ------------
Gross profit 99,829 75,501 144,489
Distribution costs (26,065) (19,239) (38,829)
------------------
Administrative expenses before exceptional
items (23,744) (20,225) (41,511)
Exceptional administrative items 5 - (176) (287)
-------------------------------------------- ------ ------------------ ------------------ ------------
Administrative expenses (23,744) (20,401) (41,798)
-------------------------------------------- ------ ------------------ ------------------ ------------
Profit on disposal of property, plant
and equipment before exceptional items (73) 1,760 1,638
Exceptional profit on disposal of
property, plant and equipment 5 - 2,036 2,022
Total profit on disposal of property,
plant and equipment (73) 3,796 3,660
------ ------------------ ------------------
Other income 1,353 1,348 2,524
Other expenses (195) (197) (112)
-------------------------------------------- ------ ------------------ ------------------ ------------
Operating profit 51,105 40,808 69,934
-------------------------------------------- ------ ------------------ ------------------ ------------
Finance costs (1,853) (2,556) (5,831)
Finance income 1,971 584 839
Net finance cost 118 (1,972) (4,992)
-------------------------------------------- ------ ------------------ ------------------ ------------
Profit before taxation 51,223 38,836 64,942
-------------------------------------------- ------ ------------------ ------------------ ------------
Taxation 6 (10,415) (27,863) (33,129)
-------------------------------------------- ------ ------------------ ------------------ ------------
Profit for the financial period 40,808 10,973 31,813
-------------------------------------------- ------ ------------------ ------------------ ------------
Profit attributable to:
Owners of the parent 40,808 10,973 31,813
-------------------------------------------- ------ ------------------ ------------------ ------------
Notes pence per pence per pence per
share share share
------ ------------------ ------------------ ------------
Earnings per share
Basic 7 10.0 2.7 7.8
Diluted 7 10.0 2.7 7.7
-------------------------------------------- ------ ------------------ ------------------ ------------
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2022
Unaudited Unaudited Audited
Notes Half year Half year Year ended
ended 30/06/2022 ended 30/06/2021 31/12/2021
------ ------------------ ------------------ ------------
GBP'000 GBP'000 GBP'000
Profit for the financial period 40,808 10,973 31,813
Other comprehensive (expense)/income:
Items that may be reclassified subsequently
to profit or loss
Change in fair value of cash flow
hedges(2) 10 468 - (74)
Realised fair value losses transferred 14 - -
to property, plant and equipment(2)
Related tax movements(2) (51) - 14
------------------ ------------------ ------------
431 - (60)
Items that will not be reclassified
to profit or loss
Remeasurement of post employment benefit
assets and obligations(3) 11 (2,543) (1,741) 12,862
Related tax movements(3) 637 1,127 (2,525)
------------------ ------------------ ------------
(1,906) (614) 10,337
Other comprehensive (expense)/income
for the period net of tax (1,475) (614) 10,277
----------------------------------------------------- ------------------ ------------------ ------------
Total comprehensive income for the
period, net of tax 39,333 10,359 42,090
--------------------------------------------- ------ ------------------ ------------------ ------------
Total comprehensive income attributable
to:
Owners of the parent 39,333 10,359 42,090
--------------------------------------------- ------ ------------------ ------------------ ------------
Non-GAAP measure
Reconciliation of adjusted EBITDA(1) to
Operating profit for the financial period:
Unaudited Unaudited Audited
Notes Half year Half year Year ended
ended 30/06/2022 ended 30/06/2021 31/12/2021
------------------ ------------------ ------------
Operating profit 51,105 40,808 69,934
------------------ ------------------ ------------
Add back/(less) exceptional costs/(credit)
impacting operating profit 5 756 (5,361) (5,230)
Add back depreciation and amortisation 18,882 19,306 38,349
------------------ ------------------ ------------
Adjusted EBITDA(1) 70,743 54,753 103,053
-------------------------------------------- ------ ------------------ ------------------ ------------
(1) Alternative performance measures are described
in Note 3 to the interim financial statements.
(2) Impacting the cash flow hedging
reserve.
(3) Impacting retained earnings.
Condensed consolidated balance sheet
as at 30 June 2022
Unaudited Unaudited Audited
Notes 30/06/2022 30/06/2021 31/12/2021
------ ----------- ----------- -----------
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 91,264 91,695 94,625
Property, plant and equipment 383,928 372,412 375,800
Right-of-use assets 26,479 26,311 25,114
Derivative financial instruments 10 130 - -
Post-employment benefit asset 11 56,219 42,521 57,754
558,020 532,939 553,293
--------------------------------------- ------ ----------- ----------- -----------
Current assets
Inventories 78,049 66,209 72,821
Trade and other receivables 93,383 82,241 64,756
Current tax receivable 111 - 3,199
Derivative financial instruments 10 278 - -
Cash and cash equivalents 64,517 15,930 61,199
236,338 164,380 201,975
Assets held for sale 875 - 875
Total assets 795,233 697,319 756,143
--------------------------------------- ------ ----------- ----------- -----------
Current liabilities
Trade and other payables (124,583) (99,112) (103,132)
Borrowings 9 (424) (372) (333)
Lease liabilities (6,701) (6,285) (6,860)
Derivative financial instruments 10 - - (74)
Current tax payable - (178) -
Provisions (1,209) (2,755) (1,869)
(132,917) (108,702) (112,268)
--------------------------------------- ------ ----------- ----------- -----------
Net current assets 104,296 55,678 90,582
--------------------------------------- ------ ----------- ----------- -----------
Total assets less current liabilities 662,316 588,617 643,875
--------------------------------------- ------ ----------- ----------- -----------
Non-current liabilities
Borrowings 9 (99,753) (69,024) (99,738)
Lease liabilities (21,297) (22,113) (20,324)
Deferred tax liabilities (97,466) (86,963) (92,352)
Provisions (7,008) (8,224) (8,232)
--------------------------------------- ------
(225,524) (186,324) (220,646)
--------------------------------------- ------ ----------- ----------- -----------
Total liabilities (358,441) (295,026) (332,914)
--------------------------------------- ------ ----------- ----------- -----------
Net assets 436,792 402,293 423,229
--------------------------------------- ------ ----------- ----------- -----------
Equity
Share capital 4,096 4,096 4,096
Share premium 4,458 4,382 4,458
Retained earnings 804,942 763,496 785,609
Other reserves 12 (376,704) (369,681) (370,934)
Total equity 436,792 402,293 423,229
--------------------------------------- ------ ----------- ----------- -----------
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2022
Share Share Retained Other Total
capital premium earnings reserves equity
(see Note attributable
12) to owners
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ---------- ----------- --------------
Balance at 1 January
2022 4,096 4,458 785,609 (370,934) 423,229
Profit for the period - - 40,808 - 40,808
Other comprehensive
expense - - (1,906) 431 (1,475)
--------- --------- ---------- ----------- --------------
Total comprehensive
income for the period - - 38,902 431 39,333
Transactions with
owners:
Share based payments - - 857 - 857
Deferred tax on share
based payments - - 109 - 109
Equity dividends paid - - (20,438) - (20,438)
Shares purchased -
share buyback scheme
(Note 12) - - - (6,298) (6,298)
Issue of own shares
held on exercise of
share options - - (97) 97 -
At 30 June 2022 (unaudited) 4,096 4,458 804,942 (376,704) 436,792
------------------------------ --------- --------- ---------- ----------- --------------
Balance at 1 January
2021 4,096 4,333 759,483 (370,041) 397,871
Profit for the period - - 10,973 - 10,973
Other comprehensive
expense - - (614) - (614)
--------- --------- ---------- ----------- --------------
Total comprehensive
income for the period - - 10,359 - 10,359
Transactions with
owners:
Share based payments - - 295 - 295
Deferred tax on share
based payments - - 11 - 11
Equity dividends paid - - (6,547) - (6,547)
Issue of own shares
held on exercise of
share options - - (105) 360 255
Issue of share capital
on exercise of share
options - 49 - - 49
--------- --------- ---------- ----------- --------------
At 30 June 2021 (unaudited) 4,096 4,382 763,496 (369,681) 402,293
------------------------------ --------- --------- ---------- ----------- --------------
Balance at 1 July
2021 4,096 4,382 763,496 (369,681) 402,293
Profit for the period - - 20,840 - 20,840
Other comprehensive
income - - 10,965 (74) 10,891
--------- --------- ---------- ----------- --------------
Total comprehensive
income for the period - - 31,805 (74) 31,731
Transactions with
owners:
Share based payments - - 595 - 595
Deferred tax on share
based payments - - 24 - 24
Equity dividends paid - - (10,233) - (10,233)
Purchase of own shares - - - (1,309) (1,309)
Issue of own shares
held on exercise of
share options - - (78) 130 52
Issue of share capital
on exercise of share
options - 76 - - 76
At 31 December 2021
(audited) 4,096 4,458 785,609 (370,934) 423,229
------------------------------ --------- --------- ---------- ----------- --------------
Condensed consolidated cash flow statement
for the six months ended 30 June 2022
Unaudited Unaudited Audited
Half year Half year Year ended
ended 30/06/2022 ended 30/06/2021 31/12/2021
------------------ ------------------ ------------
GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Cash generated from operations (Note
8) 59,544 38,551 100,497
Interest paid (1,345) (1,519) (2,928)
Other interest paid - lease liabilities (234) (377) (1,107)
Tax paid (768) (4,010) (9,960)
---------------------------------------------
Net cash inflow from operating activities 57,197 32,645 86,502
--------------------------------------------- ------------------ ------------------ ------------
Cash flows from investing activities
Purchase of property, plant and equipment (18,769) (10,059) (24,960)
Proceeds from sale of property, plant
and equipment 8 837 874
Proceeds from sale of property, plant
and equipment - exceptional - 2,882 2,882
Purchase of intangible assets (4,013) - (6,402)
Settlement of deferred consideration - - (413)
--------------------------------------------- ------------------ ------------
Net cash outflow from investing activities (22,774) (6,340) (28,019)
--------------------------------------------- ------------------ ------------------ ------------
Cash flows from financing activities
Dividends paid (20,438) (6,547) (16,780)
Drawdown of borrowings - - 170,000
Repayment of borrowings - (20,000) (160,000)
Debt issue costs - - (1,563)
Repayment of lease liabilities (4,564) (3,649) (7,575)
Proceeds from issuance of equity shares - 255 432
Purchase of own shares by Employee
Benefit Trust - - (1,309)
Cash outflow from purchase of shares (6,099) - -
Net cash outflow from financing activities (31,101) (29,941) (16,795)
--------------------------------------------- ------------------ ------------------ ------------
Net increase/(decrease) in cash and
cash equivalents 3,322 (3,636) 41,688
Cash and cash equivalents at beginning
of the year 61,199 19,552 19,552
Exchange (losses)/gains on cash and
cash equivalents (4) 14 (41)
Cash and cash equivalents at end
of the period 64,517 15,930 61,199
--------------------------------------------- ------------------ ------------------ ------------
1. AUTHORISATION OF FINANCIAL STATEMENTS
Ibstock plc ("Ibstock" or "the Group") is a manufacturer of clay
bricks and concrete products with operations in the United Kingdom.
Ibstock plc is a public company limited by shares, which is
incorporated and registered in England. The registered office is
Leicester Road, Ibstock, Leicestershire, LE67 6HS and the company
registration number is 09760850.
The interim condensed consolidated financial statements of
Ibstock plc for the six months ended 30 June 2022 were authorised
for issue in accordance with a resolution of the Directors on 26
July 2022. All disclosed documents relating to these results are
available on the Group's website at www.ibstockplc.co.uk .
Publication of non-statutory accounts
The financial information contained in the interim statement
does not constitute the Group's statutory accounts as defined in
section 434 of the Companies Act 2006. The comparative figures for
the financial period ended 31 December 2021, which have been
extracted from the statutory accounts for that period, are not the
Company's statutory accounts for that financial period. Statutory
accounts for the year ended 31 December 2021 were approved by the
Board of Directors on 8 March 2022. Those accounts have been
reported on by the Company's auditor and delivered to the Registrar
of Companies. The report of the auditor was (i) not qualified, (ii)
did not include a reference to any matters to which the auditor
drew attention by way of emphasis of matter without qualifying
their report, and (iii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
2. BASIS OF PREPARATION
The interim condensed consolidated financial statements for the
six months ended 30 June 2022 have been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting as
contained in UK-adopted IFRS.
They do not include all of the information and disclosures
required in the annual financial statements, and should be read in
conjunction with the Group's Annual Report and Accounts as at 31
December 2021, which have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as contained
in UK-adopted IFRS.
The condensed consolidated financial statements are presented in
Sterling and all values are rounded to the nearest thousand, except
where otherwise indicated.
All accounting policies applied by the Group within the interim
condensed consolidated financial statements are consistent with
those applied by the Group in its consolidated financial statements
for the year ended 31 December 2021, except in respect of taxation,
which is based on the expected effective tax rate that would be
applicable to expected annual earnings.
The following new and amended standards and interpretations have
been adopted in the preparation of the condensed consolidated
financial statements:
(a) Property, Plant and Equipment: Proceeds before Intended Use
- Amendments to IAS 16
(b) Onerous Contracts - Cost of Fulfilling a Contract -
Amendments to IAS 37
(c) Annual Improvements to IFRS Standards 2018-2020
(d) Reference to the Conceptual Framework - Amendments to IFRS
3.
None of the above standards has had a material impact on the
Group's accounting policies. There are no other standards and
amendments have been issued by the IASB since the publication of
the Group's results for the year ended 31 December 2021, which have
either not been adopted by the IFRS as contained in UK-adopted IFRS
or are not yet effective in UK-adopted IFRS at 30 June 2022 and
which management expects would have a material impact on the
Group.
In preparing the interim condensed consolidated financial
statements the Group has assessed the critical accounting estimates
and judgements applied in the preparation of the consolidated
financial statements for the year ended 31 December 2021. The areas
of critical judgement relating to exceptional items (see Note 5),
and significant source of estimation uncertainty regarding the
Group's pension scheme liability valuation assumptions surrounding
future changes in discount rates, inflation, the rate of increase
in pensions in payment and life expectancy (see Note 11) are still
considered critical to the preparation of the interim financial
statements for the period ended 30 June 2022.
Going concern
The Group's financial planning and forecasting process consists
of a budget for the current year followed by a medium term
projection and re-forecasts the current year performance on a
quarterly basis. The going concern period covers to December 2023.
The Directors have reviewed and robustly challenged the assumptions
about future trading performance, operational and capital
expenditure and debt requirements within these forecasts including
the Group's liquidity and covenant forecasts, and stress tested
within their going concern assessment.
In arriving at their conclusion on going concern, the Directors
have given due consideration to whether the funding and liquidity
resources above are sufficient to accommodate the principal risks
and uncertainties faced by the Group, particularly those relating
to economic conditions and operational disruption.
Group forecasts have been prepared which reflect both actual
performance conditions and estimates of the future reflecting
macroeconomic and industry-wide projections, as well as matters
specific to the Group. Capital enhancement projects in the clay
network were completed during H1 2022, increasing capacity 5% on
2021 levels.
The Group's committed facilities at 30 June 2022 comprise GBP100
million of private placement notes with maturities of between 7 and
12 years and a GBP125 million Revolving Credit Facility (RCF) for
an initial four year tenor, with a one year extension option. At 30
June 2022, the RCF was undrawn.
Covenants under the Group's RCF and private placement notes
require leverage of no more than 3 times net debt to adjusted
EBITDA(1) , and interest cover of no less than 4 times, tested
bi-annually at each reporting date with reference to the previous
12 months. At 30 June 2022, covenant requirements were met with
significant headroom.
The key uncertainty faced by the Group is the industry demand
for its products in light of macroeconomic factors. Accordingly,
the Group has modelled financial scenarios, which see reduction in
the industry demands for its products thereby stress testing the
Group's resilience. For each scenario, cash flow and covenant
compliance forecasts have been prepared. In the severe but
plausible scenario industry demand for Clay products is projected
to be around 30% lower for a year, which is broadly in line with
the sales reduction seen in the Clay division in 2020 during the
height of the COVID-19 pandemic, recovering to around 5% lower
after this time.
In addition, the Group has prepared a reverse stress test to
evaluate the industry demand reduction at which it would be likely
to breach the debt covenants, before any further mitigating actions
were taken. This test indicates that, at a reduction of 82% in
sales volumes in the second half of 2022 or a 38% during the period
up to the first half of 2023 or a 38% during the period up 31
December 2023, the Group would be at risk of breaching its
covenants.
In the severe but plausible low case, the Group has sufficient
liquidity and headroom against its covenants, with covenant
headroom expressed as a percentage of last twelve months adjusted
EBITDA(1) being greater than 70%.
The Directors consider this to be an highly unlikely scenario,
and in the event of an anticipated covenant breach, the Group would
seek to take further steps to mitigate, including the disposal of
valuable land and building assets and additional restructuring
steps to reduce the fixed cost base of the Group.
Having taken account of the various scenarios modelled, and in
light of the mitigations available to the Group, the Directors are
satisfied that the Group has sufficient resources to continue in
operation for a period of not less than 12 months from the date of
this report. Accordingly, the consolidated financial information
has been prepared on a going concern basis.
3. ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures ("APMs") are used within the
interim management report where management believes it is necessary
to do so in order to provide further understanding of the financial
performance of the Group. Management uses APMs in its own
assessment of the Group's performance and in order to plan the
allocation of internal capital and resources. Certain APMs are also
used in the remuneration of management and Executive Directors.
APMs serve as supplementary information for users of the
financial statements and it is not intended that they are a
substitute for, or superior to, statutory measures. None of the
APMs is outlined within IFRS and they may not be comparable with
similarly titled APMs used by other companies.
In the current period, the previously reported APMs of
like-for-like revenue and like-for-like Adjusted EBITDA margin have
been removed to reflect full current and comparative period
ownership of the Longley business eliminating the need for these
measures.
Within the interim management report, APMs are identified with a
superscript.
Exceptional items
The Group presents as exceptional on the face of the income
statement those items of income and expense which, because of their
materiality, nature and/or expected infrequency of the events
giving rise to them, merit separate presentation to allow users of
the financial statements to understand further elements of
financial performance in the year. This facilitates comparison with
future periods and to assess trends in financial performance over
time.
Details of all exceptional items are disclosed in Note 5.
Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA represents the earnings before interest,
taxation, depreciation and amortisation adjusted for exceptional
items. Adjusted EBITDA margin is Adjusted EBITDA shown as a
proportion of revenue.
The Directors regularly use Adjusted EBITDA and Adjusted EBITDA
margin as key performance measures in assessing the Group's
profitability. The measures are considered useful to users of the
financial statements as they represent common APMs used by
investors in assessing a company's operating performance, when
comparing its performance across periods as well as being used in
the determination of Directors' variable remuneration.
A full reconciliation of Adjusted EBITDA is included at the foot
of the Group's consolidated statement of comprehensive income
within the consolidated financial statements. Adjusted EBITDA
margin is included within Note 4.
Adjusted Effective Tax Rate ("Adjusted ETR")
The Group presents adjusted effective tax rate (Adjusted ETR)
within its Financial Review. This is disclosed in order to provide
users of the financial statements with a view of the rate of
taxation borne by the Group prior to the impact of non-deductible
exceptional items (defined above) and the changes in taxation rates
on deferred taxation.
A reconciliation of the adjusted ETR to the statutory rate of
taxation in the UK is set out below.
Unaudited Unaudited Audited
Half Half Year
year year ended
ended ended 31/12/2021
30/06/2022 30/06/2021
------------ ------------ ------------
Statutory rate of taxation in
the UK 19.0% 19.0% 19.0%
Less impact of permanent differences* (1.4%) (0.6%) (1.0%)
Less impact of changes in estimates
re. prior periods (0.2%) (0.8%) 0.1%
------------ ------------ ------------
Adjusted ETR 17.4% 17.6% 18.1%
Less impact of difference in
prior period true-up recognition - (1.1%) (0.4%)
Effect of higher rate applied
to deferred tax 2.9% 55.2% 33.3%
Reported ETR 20.3% 71.7% 51.0%
============ ============ ============
* The impact of permanent differences primarily comprises
the benefit from the UK super deduction on qualifying
capital expenditure
Adjusted EPS
Adjusted EPS is the basic earnings per share adjusted for
exceptional items, fair value adjustments (being the amortisation
and depreciation on fair value uplifted assets) and non-cash
interest, net of taxation (at the Group's adjusted effective tax
rate).
The Directors have presented Adjusted EPS as they believe the
APM represents useful information to the user of the financial
statements in assessing the performance of the Group, when
comparing its performance across periods, as well as being used
within the determination of Directors' variable remuneration.
Additionally, the APM is considered by management when determining
the proposed level of ordinary dividend.
A full reconciliation is provided in Note 7.
Net debt and Net debt to Adjusted EBITDA ("leverage") ratio
Net debt is defined as the sum of cash and cash equivalents less
total borrowings at the balance sheet date. This does not include
lease liabilities arising upon application of IFRS 16 in order to
align with the Group's banking facility covenant definition.
Net debt to adjusted EBITDA is the ratio of net debt to adjusted
EBITDA. The net debt to adjusted EBITDA ratio definition removes
the benefit of IFRS 16 within adjusted EBITDA.
The Directors disclose these APMs to provide information as a
useful measure for assessing the Group's overall level of financial
indebtedness and when comparing its performance and position across
periods..
A full reconciliation of net debt and the net debt to adjusted
EBITDA ratio (also referred to as 'leverage') is set out in Note
9.
Return on capital employed
Return on capital employed (ROCE) is defined as earnings before
interest and taxation adjusted for exceptional items as a
proportion of the average capital employed (defined as net debt
plus equity excluding the pension surplus). The average is
calculated using the current period end balance and corresponding
preceding reported period end balance (year end or interim).
The Directors disclose the ROCE APM in order to provide users of
the financial statements with an indication of the relative
efficiency of capital use by the Group over the period, assessing
performance between periods as well as being used within the
determination of executives' variable remuneration.
The calculation of ROCE is set out below:
Unaudited Unaudited Audited
Half year Half year Year ended
ended 30/06/2022 ended 30/06/2021 31/12/2021
------------------ ------------------ ------------
GBP'000 GBP'000 GBP'000
Adjusted EBITDA 119,043 97,362 103,053
Less depreciation (30,984) (30,970) (31,409)
Less amortisation (6,941) (6,936) (6,940)
------------------ ------------------ ------------
Adjusted earnings before interest
and taxation 81,118 59,456 64,704
Average net debt 37,266 61,325 46,169
Average equity 430,011 400,082 412,761
Average pension (56,987) (43,049) (50,138)
------------------ ------------------ ------------
Average capital employed 410,290 418,358 408,792
ROCE 19.8% 14.2% 15.8%
Average capital employed figures 30 June 31 December 30 June 31 December
comprise: 2022 2021 2021 2020
--------- ------------ --------- ------------
GBP'000 GBP'000 GBP'000 GBP'000
Net debt 35,660 38,872 53,466 69,184
Equity 436,792 423,229 402,293 397,871
Pension 56,219 57,754 42,521 43,576
Cash flow related APMs
The Group presents an adjusted cash flow statement within its
Financial Review. This is disclosed in order to provide users of
the financial statements with a view of the Group's operating cash
generation before the impact of cash flows associated with
exceptional items (as set out in Note 5) and with the inclusion of
interest, lease payment and property disposal related cash
flows.
The Directors use this APM table to allow shareholders to
further understand the Group's cash flow performance in the period,
to facilitate comparison with future years and to assess trends in
financial performance. This table contains a number of APMs, as
described below and reconciled in the following table:
Adjusted change in working capital
Adjusted change in working capital represents the statutory
change in working capital adding back cash inflows associated with
exceptional items arising in the year of GBP0.2 million (30 June
2021: adding back GBP2.1 million; 31 December 2021: adding back
GBP2.0 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 GBP0.4 million (30 June 2021: GBP3.7 million;
31 December 2021: GBP1.7 million) and inclusion of cash flows
associated with interest income, proceeds from the sale of
property, plant and equipment, purchase of intangibles and lease
payments reclassified from investing or financing activities of
GBP8.6 million (30 June 2021: GBP2.8 million; 31 December 2021:
GBP12.2 million).
Cash conversion
Cash conversion is the ratio of Adjusted operating cash flow
(defined above) to Adjusted EBITDA (defined above). The Directors
believe this APM provides a useful measure of the Group's
efficiency of its cash management during the period.
Adjusted free cash flow
Adjusted free cash flow represents Adjusted operating cash flow
(defined above) less total capital expenditure. The Directors use
the measure of Adjusted free cash flow as a measure of the funds
available to the Group for the payment of distributions to
shareholders, for use within M&A activity and other investing
and financing activities.
Reconciliation of statutory cash flow statement to adjusted cash
flow statement
Six months ended 30 June 2022 Statutory Exceptional Reclassification Adjusted
(unaudited)
-------------------------------
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ------------ ----------------- ---------
Adjusted EBITDA 69,987 756 - 70,743
------------------------------- ---------- ------------ ----------------- ---------
Change in working capital (10,689) 167 - (10,522)
------------------------------- ---------- ------------ ----------------- ---------
Impairment charges 554 (554) - -
------------------------------- ---------- ------------ ----------------- ---------
Net interest (1,579) - - (1,579)
------------------------------- ---------- ------------ ----------------- ---------
Tax (768) - - (768)
------------------------------- ---------- ------------ ----------------- ---------
Post-employment benefits (488) - (387) (875)
------------------------------- ---------- ------------ ----------------- ---------
Other 180 - (8,182) (8,002)
------------------------------- ---------- ------------ ----------------- ---------
Adjusted operating cash flow 57,197 369 (8,569) 48,997
------------------------------- ---------- ------------ ----------------- ---------
Cash conversion 69%
------------------------------- ---------- ------------ ----------------- ---------
Total capex (18,769) - - (18,769)
------------------------------- ---------- ------------ ----------------- ---------
Adjusted free cash flow 38,428 369 (8,569) 30,228
=============================== ========== ============ ================= =========
Six months ended 30 June 2021 Statutory Exceptional Reclassification Adjusted
(unaudited)
-------------------------------
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ------------ ----------------- ---------
Adjusted EBITDA 55,215 (462) - 54,753
------------------------------- ---------- ------------ ----------------- ---------
Change in working capital (11,989) 2,089 - (9,900)
------------------------------- ---------- ------------ ----------------- ---------
Net interest (1,896) - - (1,896)
------------------------------- ---------- ------------ ----------------- ---------
Tax (4,010) - - (4,010)
------------------------------- ---------- ------------ ----------------- ---------
Post-employment benefits (424) - (451) (875)
------------------------------- ---------- ------------ ----------------- ---------
Other (4,251) 2,036 (2,361) (4,576)
------------------------------- ---------- ------------ ----------------- ---------
Adjusted operating cash flow 32,645 3,663 (2,812) 33,496
------------------------------- ---------- ------------ ----------------- ---------
Cash conversion 61%
------------------------------- ---------- ------------ ----------------- ---------
Total capex (10,059) - - (10,059)
------------------------------- ---------- ------------ ----------------- ---------
Adjusted free cash flow 22,586 3,663 (2,812) 23,437
=============================== ========== ============ ================= =========
Year ended 31 December 2021 Statutory Exceptional Reclassification Adjusted
(audited)
-------------------------------
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ------------ ----------------- ---------
Adjusted EBITDA 108,283 (5,230) - 103,053
------------------------------- ---------- ------------ ----------------- ---------
Change in working capital 3,330 2,028 - 5,358
------------------------------- ---------- ------------ ----------------- ---------
Impairment charges (5,797) 5,797 - -
------------------------------- ---------- ------------ ----------------- ---------
Net interest (4,035) - (1,563) (5,598)
------------------------------- ---------- ------------ ----------------- ---------
Tax (9,960) - - (9,960)
------------------------------- ---------- ------------ ----------------- ---------
Post-employment benefits (789) - (961) (1,750)
------------------------------- ---------- ------------ ----------------- ---------
Other (4,530) (860) (9,673) (15,063)
------------------------------- ---------- ------------ ----------------- ---------
Adjusted operating cash flow 86,502 1,735 (12,197) 76,040
------------------------------- ---------- ------------ ----------------- ---------
Cash conversion 74%
------------------------------- ---------- ------------ ----------------- ---------
Total capex (24,960) - - (24,960)
------------------------------- ---------- ------------ ----------------- ---------
Adjusted free cash flow 61,542 1,735 (12,197) 51,080
=============================== ========== ============ ================= =========
4. SEGMENT REPORTING
The Directors consider the Group's reportable segments to be the
Clay and Concrete divisions.
The key Group performance measure is adjusted EBITDA(1) , as
detailed below, which is defined in Note 3. The tables, below,
present revenue and adjusted EBITDA(1) and profit/(loss) before
taxation for the Group's operating segments.
Included within the unallocated and elimination columns in the
tables below are costs including share based payments and Group
employment costs. Unallocated assets and liabilities are pensions,
taxation and certain centrally held provisions. Transactions
between segments are carried out at arm's length. There is no
material inter-segmental revenue and no aggregation of segments has
been applied.
Six months ended 30 June 2022
Clay Concrete Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
Total revenue 185,532 73,781 - 259,313
--------- --------- ------------ ---------
Adjusted EBITDA(1) 64,377 11,318 (4,952) 70,743
Adjusted EBITDA(1) margin 34.7% 15.3% 27.3%
Exceptional items impacting
operating profit (see Note
5) (756) - - (756)
Depreciation and amortisation
pre fair value uplift (10,452) (2,902) (67) (13,421)
Incremental depreciation and
amortisation following fair
value uplift (3,391) (2,070) - (5,461)
Net finance costs 965 (218) (629) 118
--------- --------- ------------ ---------
Profit/(loss) before tax 50,743 6,128 (5,648) 51,223
--------- --------- ------------ ---------
Taxation (10,415)
---------
Profit for the period 40,808
=========
Six months ended 30 June 2021
Clay Concrete Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
Total revenue 138,269 63,772 - 202,041
--------- --------- ------------ ---------
Adjusted EBITDA(1) 47,209 11,768 (4,224) 54,753
Adjusted EBTIDA margin(1) 34.1% 18.5% 27.1%
Exceptional items impacting
operating profit (Note 5) 5,727 (366) - 5,361
Depreciation and amortisation
pre fair value uplift (11,114) (2,664) (68) (13,846)
Incremental depreciation and
amortisation following fair
value uplift (3,223) (2,237) - (5,460)
Net finance costs (79) (115) (1,778) (1,972)
--------- --------- ------------ ---------
Profit/(loss) before tax 38,520 6,386 (6,070) 38,836
--------- --------- ------------
Taxation (27,863)
---------
Profit for the period 10,973
=========
Year ended 31 December 2021
Clay Concrete Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
Total revenue 280,235 128,421 - 408,656
--------- --------- ------------ ---------
Adjusted EBITDA(1) 90,634 21,740 (9,321) 103,053
Adjusted EBTIDA margin(1) 32.3% 16.9% 25.2%
Exceptional items impacting
operating profit (Note 5) 5,347 (117) - 5,230
Depreciation and amortisation
pre fair value uplift (22,101) (5,981) (135) (28,217)
Incremental depreciation and
amortisation following fair
value uplift (5,834) (4,298) - (10,132)
Net finance costs (809) (202) (3,981) (4,992)
--------- --------- ------------ ---------
Profit/(loss) before tax 67,237 11,142 (13,437) 64,942
--------- --------- ------------
Taxation (33,129)
---------
Loss for the year 31,813
=========
Clay Concrete Unallocated Total
Total segment assets GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- ------------ ----------
At 30 June 2022 579,884 152,150 63,199 795,233
At 31 December 2021 547,472 145,478 63,193 756,143
At 30 June 2021 513,208 138,333 45,778 697,319
Clay Concrete Unallocated Total
Total segment liabilities GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- ------------ ----------
At 30 June 2022 (178,484) (59,631) (120,326) (358,441)
At 31 December 2021 (155,589) (56,764) (120,561) (332,914)
At 30 June 2021 (153,231) (56,002) (85,793) (295,026)
Seasonality
Historically, activity of the Group's trading operations occurs
throughout the year and is largely unaffected by seasonal factors.
In the year ended 31 December 2021, the period to 30 June accounted
for 49.4% of the Group's annual revenue and 53.1% of the Group's
annual adjusted EBITDA. During the current financial year, absent
further significant disruption because of global macroeconomic
uncertainties, including any recurrence of the COVID-19 pandemic,
management anticipates a distribution of revenue and adjusted
EBITDA weighted somewhat towards the first half.
5. EXCEPTIONAL ITEMS(1)
Unaudited Unaudited Audited
Half year Half year Year ended
ended 30/06/2022 ended 30/06/2021 31/12/2021
------------------ ------------------ ------------
GBP'000 GBP'000 GBP'000
Exceptional cost of sales
Impairment (charge)/reversal
- Property, plant and equipment (554) 4,899 5,623
Impairment reversal - Right-of-use
assets - - 174
------------------ ------------------ ------------
Total impairment charges (554) 4,899 5,797
Other costs associated with
restructuring programme (202) (1,398) (2,302)
------------------ ------------------ ------------
Total exceptional cost of
sales (756) 3,501 3,495
Exceptional administrative
expenses:
Redundancy savings/(costs) - 11 (100)
COVID-19 administrative expenses - (187) (187)
------------------ ------------------ ------------
Total exceptional administrative
expenses - (176) (287)
Exceptional profit on disposal
of property, plant and equipment - 2,036 2,022
------------------ ------------------ ------------
Exceptional items impacting
operating profit (756) 5,361 5,230
Total exceptional items (756) 5,361 5,230
================== ================== ============
Period ended 30 June 2022
Included within the current period are the following exceptional
items:
Exceptional cost of sales
Impairment charges incurred in the current period relate to the
impairment of non-current assets at the sites earmarked for closure
in a prior period as part of the Group's single coordinated plan in
response to the COVID-19 pandemic. In order to remain consistent
with prior years, and due to their non-recurring nature, these
costs were categorised as exceptional. Similar costs are not
expected to arise in the future.
Other costs associated with restructuring programme represent
costs incurred as a result of the Group's restructuring programme
announced during 2H 2020. These costs include site security,
insurance, rates and other standing charges in connection with
closed sites. These costs were categorised as exceptional due to
the non-recurring nature of the event giving rise to the costs.
Further costs related to this programme are not expected to arise
in the future.
Tax on exceptional items
In the current period, impairment charges arising on non-current
assets are not tax deductible but gave rise to a deferred tax
credit in the prior period and as such are not tax rate impacting.
The costs associated with the closure of sites are tax
deductible.
Six-month period ended 30 June 2021 and year ended 31 December
2021
Details of exceptional items included within the prior interim
and full year periods are disclosed within Note 5 of the Group's
2021 interim results and 2021 Annual report and accounts,
respectively.
6. TAXATION
The taxation charge for the interim period is an estimate based
on the expected full year effective tax rate.
7. EARNINGS PER SHARE
The basic earnings per share figures are calculated by dividing
profit for the year attributable to the Parent shareholders by the
weighted average number of Ordinary Shares in issue during the
year.
The diluted earnings per share figures allow for the dilutive
effect of the conversion into Ordinary Shares of the weighted
average number of options outstanding during the year. Where the
average share price for the year is lower than the option price the
options become anti-dilutive and are excluded from the
calculation.
The number of shares used for the earnings per share calculation
are as follows:
Half Half Year
year ended year ended ended
30/06/2022 30/06/2021 31/12/2021
(000s) (000s) (000s)
------------ ------------ ------------
Basic weighted average number of Ordinary
Shares 408,300 409,146 409,118
Effect of share incentive awards and options 611 1,145 1,494
------------ ------------ ------------
Diluted weighted average number of Ordinary
Shares 408,911 410,291 410,612
---------------------------------------------- ------------ ------------ ------------
The calculation of adjusted earnings per share(1) is a key
measurement used by management that is not defined by IFRS. The
adjusted earnings per share(1) measures should not be viewed in
isolation, but rather treated as supplementary information.
Adjusted earnings per share(1) figures are calculated as the
Basic earnings per share adjusted for exceptional items(1) , fair
value adjustments being the amortisation and depreciation on fair
value uplifted assets and non-cash interest expenses. Adjustments
are made net of the associated taxation impact at the adjusted
effective tax rate.
A reconciliation of the statutory profit to that used in the
adjusted earnings per share(1) calculations is as follows:
Unaudited Unaudited Audited
Half Half Year
year ended year ended ended
30/06/2022 30/06/2021 31/12/2021
GBP000 GBP000 GBP000
--------------------------------------------- ------------ ------------ ------------
Profit/(loss) for the period attributable
to the parent shareholders 40,808 10,973 31,813
Add back/(less) exceptional costs/(credit)
(Note 5) 756 (5,361) (5,230)
(Less)/add back tax (credit)/charge on
exceptional items (132) 946 695
Add fair value adjustments (Note 4) 5,461 5,460 10,132
Less tax credit on fair value adjustments (951) (963) (1,834)
(Less)/add back net non-cash interest (1,703) 76 (606)
Add back/(less) tax expense/(credit) on
non-cash interest 296 (13) 110
Less impact of difference in prior year - (419) -
tax true-up recognition
Add back impact of deferred taxation rate
change 1,500 21,430 21,628
--------------------------------------------- ------------ ------------ ------------
Adjusted profit for the period attributable
to the parent shareholders 46,035 32,129 56,708
Half Half Year
year ended year ended ended
30/06/2022 30/06/2021 31/12/2021
pence pence pence
---------------------------------------- ------------ ------------ ------------
Basic EPS on profit for the period 10.0 2.7 7.8
Diluted EPS on profit for the period 10.0 2.7 7.7
Adjusted basic EPS on profit for the
period 11.3 7.9 13.9
Adjusted diluted EPS on profit for the
period 11.3 7.8 13.8
8. NOTES TO THE GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
Half year Half year Year ended
ended 30/06/2022 ended 30/06/2021 31/12/2021
------------------ ------------------ ------------
Cash flows from operating GBP'000 GBP'000 GBP'000
activities
-------------------------------------- ------------------ ------------------ ------------
Profit before taxation 51,223 38,836 64,942
Adjustments for:
Depreciation 15,413 15,838 31,409
Impairment of property plant
and equipment 554 (4,899) (5,623)
Impairment of right-of-use
assets - - (174)
Amortisation of intangible
assets 3,469 3,468 6,940
Finance costs (118) 1,972 4,992
Loss/(gain) on disposal of
property, plant and equipment 73 (3,796) (3,660)
Research and development expenditure
credit (750) (750) (1,673)
Share based payments 857 295 890
Post-employment benefits (488) (424) (789)
Other - - (87)
------------------ ------------------ ------------
70,233 50,540 97,167
Increase in inventory (5,228) (2,823) (9,435)
Increase in trade and other
receivables (28,642) (21,227) (2,617)
Increase in trade and other
creditors 23,704 13,520 18,504
Decrease in provisions (523) (1,459) (3,122)
Cash generated from operations 59,544 38,551 100,497
-------------------------------------- ------------------ ------------------ ------------
During the six months ended 30 June 2022, the Group acquired
assets with a cost of GBP18.8 million (period ended 30 June 2021:
GBP10.1 million; year ended 31 December 2021: GBP25.0 million).
Assets of GBP0.1 million were disposed of during the current period
for nil proceeds (period ended 30 June 2021: GBP2.0 million for
proceeds of GBP3.7 million; year ended 31 December 2021: GBP2.2
million for proceeds of GBP5.8 million). Capital expenditure
commitments for which no provision has been made were GBP79.9
million at 30 June 2022 (30 June 2021: GBP73.7 million; 31 December
2021: GBP57.4 million).
9. BORROWINGS, AND MOVEMENTS IN CASH AND NET DEBT
At 30 June 2022, the Group held GBP100 million of private
placement notes from Pricoa Private Capital, with maturities of
between 7 and 12 years and an average total cost of funds of 2.19%
(range 2.04%-2.27%). The agreement also contains an additional
uncommitted shelf facility of up to $88.1 million (or equivalent in
available currencies). The facility contains debt covenant
requirements of leverage (net debt to adjusted EBITDA(1) ) and
interest cover (adjusted EBITDA(1) to net finance charges) of 3x
and 4x, respectively, tested semi-annually on 30 June and 31
December in respect of the preceding 12-month period.
Additionally, a GBP125 million RCF facility was held with a
syndicate of five banks for an initial four year period ending in
November 2025, with a one year extension option. Interest is
charged at a margin (depending upon the ratio of net debt to
Adjusted EBITDA(1) ) of between 160bps and 260bps above SONIA, SOFR
or EURIBOR according to the currency of the borrowing. The facility
also includes an additional GBP50 million uncommitted accordion
facility. Based on current leverage(1) , the Group will pay
interest under the RCF initially at a margin of 160bps. This
facility contains debt covenant requirements that align with those
of the private placement with the same testing frequency. The RCF
was undrawn throughout the current six-month period and
subsequently up to the date of approval of these interim
results.
The carrying value of financial liabilities have been assessed
as materially in line with their fair values. No security is
currently provided over the Group's borrowings.
Details of borrowing facilities held at the prior interim period
and full year end dates are disclosed within Note 9 and Note 19 of
the Group's 2021 interim results and 2021 Annual report and
accounts, respectively.
Unaudited Unaudited Audited
30 June 30 June 31 December
2022 2021 2021
---------- ---------- ------------
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 64,517 15,930 61,199
Current
Privale placement (324) - (333)
Revolving Credit Facility (100) (372) -
---------- ---------- ------------
(424) (372) (333)
Non-current
Private placement (99,753) - (99,738)
Revolving Credit Facility - (69,024) -
---------- ---------- ------------
(99,753) (69,024) (99,738)
Net debt (35,660) (53,466) (38,872)
========== ========== ============
Net debt to adjusted EBITDA
ratio
Net debt (35,660) (53,466) (38,872)
Last 12 months adjusted EBITDA(1) 119,043 97,362 103,053
Impact of IFRS 16 (7,834) (6,983) (7,171)
---------- ---------- ------------
Adjusted EBITDA(1) prior to
IFRS 16 111,209 90,379 95,882
0.3x 0.6x 0.4x
========== ========== ============
10. FINANCIAL INSTRUMENTS
IFRS 13 'Financial Instruments: Disclosures' requires fair value
measurements to be recognised using a fair value hierarchy that
reflects the significance of the inputs used in the measurements,
according to the following levels:
Level 1 - Unadjusted quoted prices in active markets for
identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from
prices).
Level 3 - Inputs for the asset or liability that are not based
on observable market data (that is, unobservable inputs).
At 30 June 2022, 31 December 2021 and 30 June 2021, the Group's
fair value measurements were categorised as Level 2, except for
quoted investments within the Group's pension (valued at
GBP148,725,000 at 30 June 2022, GBP177,401,000 at 31 December 2021
and GBP177,055,000 at 30 June 2021), which were valued as Level
1.
The Group entered into forward currency contracts as cash flow
hedges to manage its exposure of foreign currency fluctuations
associated with the future purchases of plant and equipment
required for the construction of the major capital expenditure
projects. These instruments are measured at fair value using Level
2 valuation techniques subsequent to initial recognition.
At 30 June 2022, an asset valued at GBP408,000 (31 December
2021: a liability of GBP74,000; 30 June 2021: GBPnil) was
recognised for these derivative financial instruments. An amount of
GBP14,000 was transferred to property, plant and equipment in the
six-month period ended 30 June 2022. No amounts have been
reclassified to profit or loss as a result of the hedged cash flow
during the period.
At 30 June 2022, 31 December 2021 and 30 June 2021, all of the
Group's fair value measurements have been categorised as Level 2
with the exception of (i) certain equities within the Group's
pension scheme, which were categorised as Level 1 valuations and
(ii) the insured pensioner asset, which was categorised as a Level
3 valuation and uses assumptions set out in Note 11 to align its
valuation to the related liability.
At 30 June 2022, 31 December 2021 and 30 June 2021, the Group
held no other significant derivative financial instruments. There
were no transfers between levels during any period disclosed.
The carrying value of the Group's short-term receivables and
payables is a reasonable approximation of their fair values. The
fair value of all other financial instruments carried within the
Group's financial statements is not materially different from their
carrying amount.
11. POST EMPLOYMENT BENEFITS
The Group participates in the Ibstock Pension Scheme (the
'Scheme'), a defined benefit pension scheme in the UK. During the
six-month period to 30 June 2022, the Scheme surplus of GBP57.8
million decreased to a surplus of GBP56.2 million. Analysis of
movements during the six-month period ended 30 June 2022:
GBP'000
Scheme surplus at 1 January
2022 (audited) 57,754
Charge within labour costs
and operating profit (387)
Interest income 520
Remeasurement due to:
- Change in financial assumptions 146,629
- Change in demographic assumptions 444
- Experience losses (9,972)
- Return on plan assets (139,644)
Company contributions 875
Scheme surplus at 30 June
2022 (unaudited) 56,219
==========
The slight deterioration in the balance sheet position over the
period is primarily due to increased levels of short-term inflation
during the period, leading to significant expected pension
increases in deferment and payment to be awarded in 2023. This has
been offset by a significant actuarial gain arising on the
liabilities from a change in market conditions, particularly
reflecting the significant rise in corporate bond yields and
therefore the discount rate over the first half of 2022.
The financial assumptions used by the actuary have been derived
using a methodology consistent with the approach used to prepare
the accounting disclosures at 31 December 2021. The assumptions
have been updated based on market conditions at 30 June 2022:
Unaudited Unaudited Audited
30 June 30 June 31 December
2022 2021 2021
Per annum Per annum Per annum
Discount rate 3.65% 1.80% 1.80%
RPI inflation 3.20% 3.25% 3.40%
CPI inflation 2.60% 2.55% 2.70%
Rate of increase in pensions
in payment 3.65% 3.65% 3.75%
Mortality assumptions: life
expectation at age 65
For male currently aged 65 21.9 years 21.8 years 21.8 years
For female currently aged 65 24.5 years 24.5 years 24.5 years
For male currently aged 40 23.6 years 23.6 years 23.6 years
For female currently aged 40 26.4 years 26.3 years 26.3 years
Commutation factors - sample
factor at age 65 17.31 17.31 17.31
12. RESERVES
Share premium
The share premium account is used to record the aggregate amount
or value of premiums paid when the Company's shares are
issued/redeemed at a premium.
Other reserves
The movement in other reserves during the period is set out in
the table below:
Cash flow Merger Own shares Treasury Total
hedging reserve held shares other
reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ----------- --------- ----------
Balance at 1 January
2022 (74) (369,119) (1,741) - (370,934)
Other comprehensive
income 431 - - - 431
Shares purchased -
share buyback scheme - - - (6,298) (6,298)
Issue of own shares
held on exercise of
share options - - 97 - 97
At 30 June 2022 357 (369,119) (1,644) (6,298) (376,704)
------------------------ ---------- ---------- ----------- --------- ----------
-
Balance at 1 January
2021 - (369,119) (922) - (370,041)
Issue of own shares
held on exercise of
share options - - 360 - 360
---------- ---------- ----------- --------- ----------
At 30 June 2021 - (369,119) (562) - (369,681)
------------------------ ---------- ---------- ----------- --------- ----------
-
Balance at 1 July
2021 - (369,119) (562) - (369,681)
Other comprehensive
expense (74) - - - (74)
Purchase of own shares - - (1,309) - (1,309)
Issue of own shares
held on exercise of
share options - - 130 - 130
At 31 December 2021 (74) (369,119) (1,741) - (370,934)
------------------------ ---------- ---------- ----------- --------- ----------
The Cash flow hedging reserve records movements for effective
cash flow hedges measured at fair value. See Note 10 for further
detail.
The Merger reserve arose on the acquisition of Figgs Topco
Limited by Ibstock plc in the period ended 31 December 2015 and is
the difference between the share capital and share premium of Figgs
Topco Limited and the nominal value of the investment and
preference shares in Figgs Topco Limited acquired by the
Company.
The Own shares held reserve represents the Group's holding in
its own equity instruments shown as a deduction from shareholders'
equity at cost. These shares represent shares held in the Employee
Benefit Trust to meet the future requirements of the employee share
based payment plans. Consideration, if any, received for the sale
of such shares is also recognised in equity with any difference
between the proceeds from sale and the original cost being taken to
the profit and loss reserve. No gain or loss is recognised in the
income statement on the purchase, sale, issue or cancellation of
equity shares.
The Treasury share reserve represents shares acquired by the
Group as part of its share buyback programme in 2022. In April
2022, the Group announced a GBP30 million share buyback programmes
as part of its ongoing value creation strategy. These shares are
held by the Group to meet future requirements of employee share
based payment plans. At 30 June 2022, the Treasury shares reserve
contained 3,484,872 shares.
Commencing 10 May 2022, the Group engaged its brokers to
purchase shares on the open market on its behalf. The terms of
these arrangements commit the Group to further purchases of its own
shares for up to cGBP24 million, which it can revoke without
penalty outside of regulatory close periods.
13. RELATED PARTY TRANSACTIONS
There are no related party transactions nor any related party
balances in either the 2021 or 2022 financial periods.
14. DIVIDS PAID AND PROPOSED
A final dividend for 2021 of 5.0 pence per ordinary share (2020:
1.6) was paid on 13 May 2022. The Directors have declared an
interim dividend of 3.3 pence per ordinary share in respect of 2022
(2020: 2.5 pence), amounting to a dividend of GBP13.4 million
(2021: GBP10.2 million). The interim dividend will be paid on 13
September 2022 to all shareholders on the register at close of
business on 19 August 2022.
These condensed consolidated financial statements do not reflect
the 2022 interim dividend payable.
15. POST BALANCE SHEET EVENTS
Other than the interim dividend declared by the Directors (see
Note 14), since the balance sheet date no material subsequent
events requiring further disclosure or adjustments to these
financial statements have been identified.
Independent Review Report to Ibstock plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated balance sheet,
the condensed consolidated statement of changes in equity, the
condensed consolidated cash flow statement and related notes 1 to
15.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of
Ibstock Plc (the "Group") will be prepared in accordance with
United Kingdom adopted international accounting standards. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim
Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE (UK), however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the group a conclusion on the
condensed set of financial statement in the half-yearly financial
report. Our conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council. Our work
has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the
conclusions we have formed.
Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
26 July 2022
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