Ibstock Plc ("Ibstock" or the "Group"), a leading UK manufacturer of a diverse range of building products and solutions, announces results for the year ended 31 December 2023.
Statutory Results
Year end 31 December | 2023 | 2022 | Δ 1Y | % change |
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Revenue | £406m | £513m | (£107)m | (21)% |
Profit before taxation | £30m | £105m | (£75)m | (71)% |
EPS | 5.4p | 21.6p | (16.2)p | (75)% |
Adjusted Results
Year end 31 December | 2023 | 2022 | Δ 1Y | % change |
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Adjusted EBITDA | £107m | £140m | (£33)m | (23)% |
Adjusted EBITDA margin | 26.5% | 27.2% | (70)bps | (3)% |
Adjusted EPS | 13.9p | 22.7p | (8.8)p | (39)% |
Total dividend per share | 7.0p | 8.8p | (1.8)p | (20)% |
Adjusted free cashflow | (£16)m | £50m | (£66)m | >(100)% |
Net debt | £101m | £46m | £55m higher | >(100)% |
Resilience and financial strength
Resilient performance against a challenging market backdrop; adjusted EBITDA1 of £107 million (2022: £140 million) in line with expectations set at the start of the year, underlining the quality and resilience of the business and steps taken to reduce costs
Revenue down 21% to £406 million (2022: £513 million) as sales volumes reduced in line with UK domestic brick deliveries2. Despite this challenging backdrop, selling prices remained stable through the year
Adjusted EBITDA1 margins of 26.5% remained strong (2022: 27.2%) reflecting a continued focus on customer service and execution, combined with the disciplined and decisive management of capacity and costs.
Statutory profit before tax of £30 million (2022: £105 million) including an exceptional charge of £31 million, of which £10 million was a cash cost, following the restructuring programme undertaken during the year (2022: exceptional profit of £6 million).
Robust year-end balance sheet position, with closing net debt of £101 million (2022: £46 million) representing leverage1 of 1.1 times (2022: 0.4 times), in the middle of our target range.
Cash flow for the year included £66 million of capital expenditure and £25 million investment in finished goods inventories providing the platform for rapid recovery and growth as markets improve.
Recommended final dividend of 3.6p per share (2022: 5.5p), bringing the total dividend for the year to 7.0p (2022: 8.8p) representing a 50% pay-out on adjusted earnings per share, consistent with our stated capital allocation framework
Active management of cost and capacity, while continuing to invest in future capability
Comprehensive operational review undertaken during the year to reduce fixed cost and align capacity to near term demand expectations
The resulting restructuring programme included a number of actions to temporarily reduce capacity across the business, as well as the permanent closure of two clay brick factories
Headcount reductions and fixed costs savings with an annualised value of £20 million achieved, with around £5 million of this captured in 2023 and the full amount to be achieved in 2024. One-off cash costs of up to £10 million, of which around £5 million was paid in 2023; balance to be incurred in 2024.
Good progress on all elements of the Group’s capability investment programme, which is now nearing completion:
Commissioning of the new Atlas brick factory in the West Midlands commenced on schedule, with production expected to ramp up over the course of the year
Organic investments to build a market leading position in brick slips are progressing to plan. The first slips to be produced on our automated cutting line at Nostell in West Yorkshire will be delivered during the first half of 2024
Focus on extracting greater value, to accelerate performance as our markets recover
Fundamental drivers underpinning demand in our markets remain firmly in place.
The Group is developing opportunities to accelerate its recovery as conditions normalise over the medium term by extracting higher value:
From our existing portfolio – Building on the launch of the “One Ibstock” brand by integrating our Group-wide sales and commercial functions into a single team to drive improved customer-centricity and cross-selling
From our factory network – The combined effect of our investment projects and targeted closures will result in a permanent net capacity increase of up to 5% within our clay brick manufacturing network compared to 2022, with significant improvements in efficiency, productivity and environmental performance
From new product development – Our Nostell investment will provide a step change in capacity for brick slips, a key pillar in our growing portfolio of building envelope technologies within Ibstock Futures, targeting high growth market niches
From our unrivalled clay reserves – Further progress made towards the production of calcined clay for use as a low-carbon cementitious replacement, with further discussions with potential commercial partners expected in 2024
Current trading and outlook
Activity in the early weeks of 2024 has been in line with the subdued levels seen in the latter part of the 2023 year; while remaining cautious, we currently anticipate a degree of improvement as the year progresses
Significant action on fixed cost will deliver a year-on-year benefit of £15 million in 2024, broadly equivalent to the benefit in 2023 from fixed cost absorption into finished goods inventories
With the factory network running at lower levels of utilisation, the Group will retain a level of elevated fixed cost in 2024, which preserves our ability to build back quickly as markets recover
We anticipate year-on-year inflation across the cost base as a whole in 2024 albeit at a more modest rate than 2023. We will continue to monitor and respond to cost and pricing dynamics through the year
The continued strength of the balance sheet provides both resilience and optionality in respect of future growth investments
Despite the cautious outlook for 2024, the Group remains confident in its ability to continue to respond to market conditions, and to deliver strong growth and continued cash generation over the medium term as markets recover
Joe Hudson, Chief Executive Officer, commented:
“We have delivered a resilient performance for the year in what have been very difficult market conditions, and I am proud of the way that colleagues across the Group have responded in such challenging circumstances. Our results reflect both continued strong execution and the difficult but decisive actions taken to reduce headcount and realign capacity with near term market conditions. The organisational changes implemented during the second half of the 2023 year have created a leaner, more customer-focused business, which will deliver an enduring benefit for years to come.
“In doing so, we have also created a platform to accelerate innovation, with a particular focus on the sustainability of our products and processes. In combination with the strength of our brand and unrivalled product portfolio in the UK construction marketplace, we believe this will unlock significant value over the years ahead.
“As we focus on doing the right things to respond to market conditions in the near term, we are moving towards completion of the key investment projects that will underpin our growth as the market recovers. Our investment in new low cost, efficient and more sustainable brick capacity at our Atlas facility, and a significant capacity expansion in the fast-growing brick slips market, are on track and will support our medium-term growth objectives.
“Activity in the early weeks of 2024 has continued to reflect the more subdued demand environment experienced throughout the latter part of 2023. As we look further ahead, it is clear that market fundamentals remain supportive, with significant unmet demand for new build housing in the UK. The Group’s conviction in its medium-term prospects is underpinned by an expectation of a return to normalised conditions within its core markets combined with the incremental returns generated from our significant capital investment programme. Although the timing of this recovery is uncertain, Ibstock is well positioned to benefit and to deliver on our growth targets over the medium term.