TIDMIBST
RNS Number : 4785H
Ibstock PLC
04 August 2021
Interim results
4 August 2021
Ibstock plc
Interim Results for the six months ended 30 June 2021
Strong H1 trading performance with clear focus on growth
opportunities
Ibstock plc ("Ibstock" or the "Group"), a leading UK
manufacturer of clay bricks and concrete products, announces its
results for the six months ended 30 June 2021.
Statutory results
------------------------ -----------------------------------------------------
Six months ended 30
June 2021 2020 2019 1Y 2Y
------------------------ -------- --------- -------- --------- -----------
Revenue GBP202m GBP131m GBP203m +54% (1%)
-------- --------- -------- --------- -----------
Profit / (loss) before GBP39m (GBP52m) GBP41m +GBP91m (GBP2m)
taxation
-------- --------- -------- --------- -----------
EPS 2.7p (12.1p) 8.1p +14.8p (5.4)p
-------- --------- -------- --------- -----------
Interim dividend per
share 2.5p Nil 3.2p
------------------------ -------- --------- -------- --------- -----------
Adjusted results(1)
Six months ended 30
June 2021 2020 2019 1Y 2Y
-------- --------- -------- ---------
Adjusted EBITDA GBP55m GBP10m GBP59m +>100% (7%)
------------------------ -------- --------- -------- --------- -----------
Adjusted EPS 7.9p (0.9p) 9.0p +8.8p (1.1)p
------------------------ -------- --------- -------- --------- -----------
Adjusted free cashflow GBP23m (GBP15m) GBP9m +GBP38m +GBP14m
------------------------ -------- --------- -------- --------- -----------
Net debt GBP53m GBP103m GBP62m (GBP49m) (GBP9m)
------------------------ -------- --------- -------- --------- -----------
In order to provide a more relevant performance commentary,
comparison in this statement has been made to the corresponding 6
month periods in both 2020 and 2019, the latter considered to
represent a more meaningful pre-COVID baseline for performance
comparisons. Longley Concrete is included in 2021 and 2020 results
but not 2019 as acquired in H2 2019.
All numbers from continuing operations
Operational Highlights
-- Strong operating performance with Group revenue approaching 2019 levels and divisional margins back to 2019
levels
on a like-for-like basis(1) , benefiting from 2020 restructuring actions and good overall cost management
-- Market fundamentals remain sound, underpinned by robust UK housing demand and good mortgage availability
-- Strong demand from RMI markets with UK consumers continuing to prioritise spending on the home
-- Impacts from tighter supply chain conditions have been well managed, with inflation, mainly within the
Concrete
Division, being passed through
-- Initiatives to drive innovation, efficiency and sustainability are accelerating the momentum of the business
Financial Highlights
-- Strong trading performance with Group revenue for the six months to 30 June 2021 of GBP202 million up by 54%
(2020:
GBP131 million, 2019 GBP203 million). On a like-for-like basis (1) , revenues were around 94% of 2019 levels
-- Group adjusted EBITDA(1) of GBP55 million materially above GBP10 million in H1 2020 reflecting robust
recovery,
and within 7% of H1 2019 adjusted EBITDA(1) of GBP59 million
-- Clay division revenues of GBP138m representing 92% of 2019, with sales volumes ahead of expectations and
adjusted
EBITDA(1) margin of 34%, in line with HY 2019
-- Concrete division revenues of GBP64m were 22% above 2019, or in line on a like-for-like basis(1) with
like-for-like
adjusted EBITDA margin of 20.6%, marginally ahead of HY 2019
-- Statutory profit before tax of GBP39 million (2020: loss of GBP52 million) reflects strong recovery from
COVID-impacted
period in 2020 and reduced exceptional costs(1) with a net exceptional gain of GBP5 million (2020: exceptional
cost of GBP35 million), and within 5% of H1 2019 profit before tax of GBP41 million
-- Expected cost savings of GBP10 million captured in full during the period (being half of our annualised target
of GBP20 million from FY20 restructuring), with good fixed cost discipline across the business
-- Strong free cash flow and robust balance sheet with 0.6x net debt to adjusted EBITDA leverage ratio(1) at
period
end, down from 1.5x at 2020 year-end, and 1.6x at H1 2020 period end
-- Interim dividend of 2.5p per share (2020: nil) reflecting strong performance and confidence in longer-term
outlook
Current Trading and Outlook
-- Demand in the initial weeks of the second half has remained robust, although supply chain challenges,
principally
relating to freight availability and the impact of COVID constraints on factory labour, have become more
evident
-- Commissioning of capital enhancements underway to bring clay network to around 95% of 2019 volume levels from
the
middle of 2022
-- Releasing updated ESG targets in H2 2021, including more ambitious targets for carbon reduction
-- Board now expects adjusted EBITDA(1) for the 2021 year to be modestly ahead of its previous expectations(2)
Joe Hudson, Chief Executive Officer of Ibstock plc,
commented:
"We delivered a strong performance for the first half, supported
by the UK construction sector's continued recovery from the period
of peak pandemic impact. Underlying market fundamentals remained
robust, backed by demand for new housing, and we have captured the
benefits of last year's restructuring and re-focused on growth
opportunities.
"The GBP60 million investment in the redevelopment of our clay
brick facilities in the West Midlands will expand our capacity
significantly from early 2024, consolidating our leadership
position in the clay brick market. It will also demonstrate our
commitment to leading our industry on sustainability issues,
producing the UK's first net-zero carbon bricks, an innovation that
is already generating significant customer interest.
"We are carrying good momentum into the second half and now
expect adjusted EBITDA(1) for the year to be modestly ahead of
previous expectations (2) , although we are mindful of continuing
risks to the UK's economic recovery, and the potential short-term
impact of supply chain disruption and inflation on our sector.
Ibstock has a range of growth initiatives in development, focused
on the core business and the key industry trends of sustainability
and the industrialisation of construction processes. We are excited
about the potential in this pipeline and believe we are well placed
to deliver attractive growth and shareholder returns into the
future."
(1) Alternative Performance Measures are described in Note 3 to
the results announcement.
2 In March 2021 Full Year results Announcement, the Board
indicated it was comfortable with market consensus expectations for
2021 adjusted EBITDA at that time of around GBP93 million
Results presentation
Ibstock is hosting an audio webcast for investors and analysts
at 10.00am UK time today.
To register for the webcast, please see:
https://brrmedia.news/IBST_HY21
The presentation can also be heard via a conference call, where
there will be the opportunity to ask questions.
Conference Call Dial-In +44 (0)330 336
Details: 9125
Confirmation code: 7416159
An archived version of today's webcast analyst presentation will
be available on http://www.ibstockplc.co.uk later today.
Ibstock plc 01530 261 999
Joe Hudson, CEO
Chris McLeish, CFO
Citigate Dewe Rogerson 020 7638 9571
Kevin Smith
Nick Reading
About Ibstock plc
Ibstock plc is a leading UK manufacturer of clay bricks and a
diversified range of clay and concrete products. Its principal
products are clay bricks, brick components, concrete roof tiles,
concrete substitutes 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.
Chief Executive's Review
Introduction
I am pleased to report a strong performance for the first half
of the year. The steady and sustained recovery evident in the
second half of 2020 continued as the UK construction sector
rebuilds from the period of peak COVID-19 impact in Q2 2020. It was
also another period of strategic progress for Ibstock as we
consolidated the benefits of last year's restructuring and
re-focused on organic growth opportunities. Underlying market
fundamentals remained robust, supported by strong household balance
sheets, low interest rates and the Government's policies.
The steps taken in 2020 to reshape the business, which were
accelerated by our response to COVID-19, have ensured Ibstock has
an efficient, well maintained asset base and we delivered a
material reduction in fixed costs. Our manufacturing footprint is
now leaner and more flexible, better able to meet changing demand
patterns as we move forwards.
The sustained improvement in trading conditions in the period
allowed us to re-focus on the initiatives which will support our
longer-term growth. In April 2021, we announced a GBP60 million
investment to redevelop our wire-cut clay brick facilities in the
West Midlands, including the replacement of the existing mothballed
Atlas plant with a new state-of-the-art factory, which will
manufacture the UK's first net-zero carbon bricks. The development
is on track, with the planning process now underway, and initial
feedback from customers on the future availability of net-zero
bricks has been very positive. The Atlas factory is expected to
begin commissioning in the second half of 2023.
Our programme of investment in our existing facilities to
upgrade their capabilities, improving efficiency and reliability,
has continued. Whilst the timing of commissioning has been impacted
by COVID-19, we expect all projects to be fully commissioned from
early 2022, adding around 5% in network capacity relative to
current levels.
Ibstock has a range of additional growth initiatives in its
development pipeline, focused on the key industry trends of
sustainability and the industrialisation of construction processes.
Our strong financial position, which will be supported by
significant ongoing cash generation, provides us with a platform to
accelerate progress on these objectives and we are well advanced in
mapping out near and longer-term investment plans. We are excited
about the potential in this pipeline and we are well-placed to
deliver attractive growth and shareholder returns into the
future.
We continue to concentrate on the three pillars of our
operational strategy: Sustain, Innovate and Grow. During the
period, we made particular progress in the areas of new product
development and sustainability, building on the momentum
established over the three preceding years. Further detail on these
initiatives is provided below.
Financial Performance
The results for the period reflect a robust recovery on 2020,
with first half revenues increasing significantly as trading
conditions improved, following the material impact of COVID-19 in
the prior year period when many of our customers temporarily
curtailed their operations. Activity in the first half was
characterised by a sustained recovery in demand with Group revenues
on a like-for-like(1) basis (removing the impact of Longley)
modestly below 2019 levels.
Group revenue for the six months to 30 June 2021 of GBP202
million was up by 54% (2020: GBP131 million, 2019 GBP203 million).
On a like-for-like basis(1) , 2021 revenues were around 94% of 2019
levels, with concrete like-for-like revenues(1) back in line with
2019, and clay revenues some 8% below 2019, with lower sales
volumes offset by a modest benefit from price.
We delivered a strong operational performance, with costs and
productivity well managed against a backdrop of increasing strain
in the wider industry supply chain over the course of the period.
The results for the first half reflect the benefit of the
restructuring actions taken in 2020, with good fixed cost
discipline maintained across the business ensuring that the
expected cost savings were captured in full. We anticipate a
proportion of these savings will be added back over the next 12
months to support volume growth as the Group continues to recover
from the lower demand levels experienced during 2020, and that
residual savings will support margin accretion, relative to 2019
levels, over the medium term.
In areas of our cost base, we have seen material inflationary
pressures, which intensified during the latter part of the period,
and were felt particularly on the concrete side of our business.
Despite these pressures, our cost and efficiency focus, alongside
an appropriate commercial response, enabled us to deliver
underlying margins in both divisions that were back in line with
2019 levels. Whilst we expect supply chain conditions to normalise
over time, we remain mindful of the risks in the near-term.
Adjusted EBITDA(1) of GBP55 million was materially above the
GBP10 million recorded for H1 2020 and within 7% of 2019 adjusted
EBITDA(1) of GBP59 million. The overall Group adjusted EBITDA(1)
margin of 27% increased from 23% in H2 2020, driven by the volume
recovery and fixed cost savings. Group margins of 27% were modestly
behind H1 2019 levels of 29% due principally to divisional mix, as
Concrete as a proportion of the Group has increased; on a like for
like basis, adjusted EBITDA margins(1) in each division were back
in line with 2019 levels.
The statutory profit before tax for the year was GBP39 million
(2020: loss of GBP52 million, 2019: GBP41 million) reflecting the
market recovery and an exceptional gain of GBP5 million (2020:
GBP35 million exceptional cost, principally related to COVID-19 and
the restructuring of the business). Exceptional items in H1 21
included an exceptional gain(1) of GBP2 million from the disposal
of land, a credit of GBP5 million following the reversal of the
previously recognised impairment of the Atlas site, and exceptional
costs of GBP2 million associated principally with the closure of
sites announced in 2020.
Once again, Ibstock delivered an excellent cash performance,
with net debt reducing by GBP16 million over the prior yearend to
GBP53 million at period end (December 2020: GBP69 million) ,
representing a net debt to adjusted EBITDA ratio(1) of 0.6 times
(Year end 2020: 1.5 times), excluding the impact of IFRS 16. The
Group continued to manage fixed and working capital effectively
throughout the first half, with finished goods inventories broadly
in line with 2020 year-end (and at the lower end of the historical
range), and capital expenditure of GBP10 million (2020: GBP15
million). Inventory levels were around 6% below the level at 30
June 2020.
Dividend
The Board has decided to pay an interim dividend of 2.5 pence
(2020: nil; 2019: 3.2 pence), reflecting the performance and cash
generation of the business in the half, and the Board's confidence
in the longer term outlook for the Group.
Divisional Review
The table below sets out segmental sales and adjusted EBITDA(1)
and margins for the six-month period:
Clay Concrete Central Total
costs
GBP'm GBP'm GBP'm GBP'm
------- --------- -------- -------
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%
Six-month period ended
30 June 2020
Total revenue 86.5 44.5 - 131.0
------- --------- -------- -------
Adjusted EBITDA(1) 7.6 5.5 (3.6) 9.5
======= ========= ======== =======
Margin 8.7% 12.5% 7.3%
Six-month period ended
30 June 2019
Total revenue 150.9 52.4 - 203.3
------- --------- -------- -------
Adjusted EBITDA(1) 51.2 10.5 (2.7) 59.0
======= ========= ======== =======
Margin 33.9% 20.0% 29.0%
Ibstock Clay
Our Clay business continued its recovery in the period, building
on the momentum of the second half of 2020. Sales volumes in the
first half were ahead of our expectations at the beginning of the
year, supported by robust demand from both our new build housing
and RMI market customers. We now expect market demand to be
sustained at these levels over the second half of the year,
notwithstanding the near-term supply chain risks of input cost and
availability.
Productivity and cost were well managed during the period, with
the active network running at high levels of utilisation and first
half fixed cost savings captured in full.
Domestic industry production for the first five months of 2021
totalled around 780 million bricks, being around 90% of 2019
levels, and imported brick volumes reduced to around 17% of total
market volumes supplied, down slightly from around 19% in the
corresponding period of 2019.
Divisional revenue was GBP138 million in the first half of 2021,
60% higher year on year (2020: GBP87 million) and c.92% of the
revenue reported for the first half of 2019. Adjusted EBITDA(1) at
GBP47 million in 2021, materially higher year on year (2020: GBP8
million) and within 8% of the GBP51 million reported for 2019,
reflecting the substantial recovery in sales volumes and the
benefit of cost reduction actions.
Clay adjusted EBITDA(1) margins were 34%, back in line with H1
2019 (2019: 34%), with good fixed cost and margin/mix management
offsetting the reduction in volumes.
Ibstock Concrete
The Concrete Division delivered a robust performance in the
first half as it continued to benefit from its significant exposure
to a broad range of RMI markets and resilient demand for its
roofing, flooring and infrastructure products.
Divisional revenue in the period was GBP64 million,
significantly ahead of 2020 (2020: GBP45 million) and representing
122% of 2019, or in line on a like-for-like basis(1) , adjusting
for the acquisition of Longley Concrete in July 2019 (which
delivered EBITDA of around GBP1 million on sales of GBP11 million
in H1 2021). On a like-for-like basis, sales volumes of
manufactured products were modestly below 2019 levels (in line with
the expectations set at the beginning of the year), with a slight
increase in the volume of purchased product sales. Adjusted
EBITDA(1) of GBP12 million was double the level achieved in the
prior year (2020: GBP6 million) principally reflecting the higher
sales volumes in the first half. Adjusted EBITDA(1) in the period
was GBP1.3 million ahead of 2019, reflecting both the Longley
acquisition and a small increase in adjusted EBITDA margins(1) on a
like-for-like basis as selling prices delivered modest unit margin
growth.
Adjusted EBITDA margins(1) of 18.5% were around 150 bps below
the 2019 level, but materially above 2020, which was heavily
impacted by COVID-19. Excluding Longley Concrete, on a
like-for-like basis, adjusted EBITDA margins(1) of around 20.6%
were marginally ahead of 2019, as inflationary impacts in certain
cost categories were more than offset by cost saving initiatives
and good commercial execution.
Manufacturing footprint & fixed cost base
Ibstock Clay
In response to the sharp contraction in economic activity
experienced during 2020, the Group took a number of actions to
scale network capacity to the near-term demand outlook, which was
around 85% of 2019 volume levels, during the second half of 2020.
These actions enabled the Group as a whole to remove around GBP20
million of annualised fixed costs from the business. During the
first half of the 2021 year, the clay division was successful in
achieving its expected cost savings, enabling the delivery of a 34%
adjusted EBITDA margin(1) , in line with 2019.
As volumes have recovered, we have taken steps to bring capacity
back on line, with network outputs running at around 90% of 2019
volume levels by June 2021. We are currently commissioning our
enhancement project at the Leicester Soft Mud 2 factory and, over
the next 9-12 months will commission our other enhancement projects
at Ellistown and Laybrook factories. Together, these will add
around a further 5% of network capacity, meaning that we expect to
have around 95% of 2019 volume levels available from the middle of
2022.
Looking further ahead, with the market outlook now clearer, the
Group has refocused on growth, and the redevelopment of our wire
cut brick facilities in the West Midlands will deliver a
significant capacity expansion when they come on stream from early
2024.
Ibstock Concrete
The restructuring actions undertaken in the Concrete division
during 2020 centred on rationalising the manufacturing footprint,
and centralising and streamlining the support functions. Given its
significant exposure to RMI markets, the division has benefited
from a recovery back broadly to 2019 levels, with network
utilisation returning to levels close to those prior to the
pandemic.
During the first half of 2021, we were successful in achieving
the targeted cost savings in full, underpinning the delivery of
like-for-like adjusted EBITDA margins(1) of just over 20%,
marginally ahead of 2019.
We see opportunities to deploy capital within the existing
concrete and modular business to realise further capacity in the
network delivering faster payback at similar return levels to the
existing business.
A clear, long-term investment case
Our business, which comprises our market-leading UK clay brick
business and a growing presence in attractive concrete and modular
product markets, delivers structurally high margins and strong free
cash flows. We benefit from a significant and diversified asset
base, and an attractive range of future growth opportunities.
In developing and extending our business, we are focused on the
two key trends that we believe will transform our industry over the
long-term: firstly, an increasing focus on the social and
environmental impacts of all construction activity; and secondly, a
new wave of industrialisation redefining the way that residential
buildings are constructed.
Our strategy has three operational pillars: Sustain, Innovate
and Grow. We have delivered another period of strong progress
against this strategy and have a clear view of our priorities in
the years ahead. These are detailed further below.
Strategic Initiatives
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
-- Sustainability and our social impact
Health and safety
The Group continued to make significant progress towards the
targets of its health and safety roadmap during the period, with
data for the first half of 2021 showing a 15% reduction in the Lost
Time Incident Frequency Rate compared to the baseline 2016
year.
Work is continuing on the implementation of a new health and
safety management system over the next 12 months, to drive
enterprise-wide standards and promote more effective sharing of
best practice.
Operational excellence
During 2021, we are focused on several transformation projects,
which are already delivering enhancements to the management of our
clay quarries and improving materials management across our factory
networks. We are also investing further in developing our talent
and leadership programmes, to ensure that we can attract, retain
and develop our leaders of tomorrow.
Sustainability and our social impact
Our ambition is to be the most sustainable manufacturer of clay
and concrete products in the UK, and we have continued to make
strong progress across all areas of Environmental, Social and
Governance (ESG).
Ibstock has invested in its network over a sustained period to
ensure that we lead the way in environmental performance. Over the
last ten years, investments in new capacity at our Chesterton,
Eclipse and Lodge Lane plants have all reduced the carbon footprint
of our manufacturing processes. Continued sustaining investments in
our network, such as the kiln investment being commissioned at our
Laybrook plant in the South East of England, will enable us to
achieve further significant progress towards our environmental
targets.
Our plans for the redevelopment of our wirecut brick facilities
in the West Midlands will see our Atlas factory become what we
believe will be the UK's only Scope 1 & 2 Net Zero brick
factory. The combination of reduced process emissions and greater
thermal efficiency will cut the carbon intensity of bricks produced
at the Atlas site by 50% compared to the existing factory. The
remaining emissions will be offset using high-quality emission
reduction projects.
Other notable areas of progress during the first half of 2021
included: the procurement of 100% of the Group's electricity from
renewable sources; and, as part of our commitment to building
sustainable UK supply chains, over 80% of procurement spend in the
period met the criteria of Ibstock's Sustainable Supplier Code, up
from 54% in the previous year.
Our sustainability roadmap, first published back in 2018, has
provided the right framework to drive progress in the key areas of
our ESG agenda. However, as a business, we now need to go further,
and faster, in delivering on our sustainability commitments and, to
this end, we intend to publish more ambitious ESG targets,
including upgraded targets for carbon reduction, during the second
half of the year.
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
-- Digital transformation
Product innovation
As market leader in clay and concrete building materials, we
have the broadest range of products and systems available in the
UK, and we continue to invest to enhance our offer.
Our recent investments in our production capabilities and focus
on innovation have enabled us to maintain momentum in new product
development pipeline. Work in the period included the launch of
three new brick types from our Leicester site targeting the
specification market and high-end housing developments: Albus,
Niveus and Tenebris have been designed to meet the growing demand
for white and grey soft mud bricks with hand-creased textures.
This style of brick has been growing in popularity with
architects and specifiers over recent years but supply has been
limited primarily to products imported from mainland Europe.
Utilising Ibstock's state of the art manufacturing capabilities and
brickmaking expertise, these three new bricks offer the aesthetic
appeal of imported products but are produced in the heart of the
UK.
The redevelopment of our Atlas factory will enable the
introduction of the first net zero bricks to the UK market from
late 2023 and initial feedback from customers on this innovative
new product has been very positive.
In the concrete division, we continue to innovate, using novel
ingredients to bring exciting new products to market. Within the
infrastructure business for example, our ultra-lightweight cable
troughing product, which uses polymer technology, is delivering
cost and environmental benefits while making handling and
installation simpler for our customers.
New product development is a crucial part of our growth plans
and, with a pipeline of innovation, we are committed to the
continuous enhancement of our product portfolio to underpin our
market and margin leadership. In order to accelerate the pace of
innovation we expect to increase spending on research and
development by around GBP2 million per annum over the next few
years.
Customer experience
With COVID-19 driving a significant switch to remote working, we
have modified our marketing approach accordingly to a focus on
digital marketing.
Our recent 'Made of' digital campaign targeting architects and
specifiers launched in March 2021 and will run for the remainder of
the year. 'Made of' has been designed to raise awareness of both
Ibstock's leading range of products and systems, and the extensive
in-house design and technical expertise we offer which can add
significant value to clients early in the specification
process.
Digital transformation
The digitisation of our business will be a key strategic enabler
over the coming years, improving our efficiency and flexibility,
and enabling greater customer collaboration. Initial investment has
been focused on improving the efficiency of our operations and
using digital tools to reduce friction in the supply chain, whilst
promoting stronger partnership with customers.
The roll-out of the new, paperless outbound logistics processes
across the Group is progressing, with implementation of digital
inventory management processes at pilot sites well advanced, ahead
of roll out across the clay plant network thereafter.
Grow
Our growth focus encompasses two distinct components: first,
investments to enhance our existing business; and second,
investments to accelerate the growth and diversification of our
revenue base within the UK building envelope. A pplying our clear
and consistent investment criteria, we have the ability to drive
profitable, sustainable growth over the medium term.
- Investments to drive growth in existing business
We continue to invest in our Clay manufacturing assets in order
to modernise our production capability, expand capacity and improve
its environmental performance, in line with our strong commitment
to sustainability. Our broad, differentiated factory footprint
provides us with unique optionality to make targeted organic
investments to support growth over the medium term, with the Atlas
redevelopment project being the latest example.
- Investments to diversify our revenue base
Alongside investments to grow our existing business, we are
committed to investing to broaden and diversify our revenue base,
and have a number of attractive opportunities, both organic and
inorganic in nature. These opportunities cover the following
areas:
Building Envelope, Landscaping and Infrastructure investments
-- Traditional Construction Methods
o Existing Products
o Adjacent Products that share our routes to market
-- Modern Methods of Construction
o Façade Products
o Façade Solutions
o Partnerships within the supply chain to exploit synergistic
opportunities
Leveraging our competitive position to drive value through
sustainability
-- Alternative uses to create further value from existing
clay reserves
-- Substituting natural gas in brick manufacturing with
alternative fuels
The strong recovery in the Group's trading and financial
position has enabled us to prioritise focus on these areas, with a
number of short and longer-term investment initiatives already
identified. The potential range and scale of opportunities
available to us in these areas is potentially very significant, and
with the financial resources generated from our strong, cash
generative base business, we believe the Group has the ability to
deliver attractive rates of growth, in excess of historic
conventional market rates.
Outlook
Trading in the first half of 2021 was strong, supported by solid
market fundamentals, with robust RMI volumes and strong UK housing
demand. Against this backdrop, we executed well, with like-for-like
adjusted EBITDA(1) margins in both divisions back to 2019
levels.
With a leaner operating platform now in place, we will continue
to manage output and cost closely going forwards. Capacity will be
increased during the first half of 2022 as we complete
commissioning of the three capital enhancement projects that were
delayed by COVID, bringing total capacity up to around 95% of 2019
volume levels. Although the decision to redevelop the mothballed
Atlas facility will cap network output to marginally below 2019
volume levels in the short-term, medium term capacity is expected
to increase above 2019 levels as the new Atlas factory is brought
on line from early 2024.
Industry supply chains became more stretched as we progressed
through the first half, with supply of materials, labour and
freight expected to drive near-term pressure as we move through the
balance of the year. Ibstock has managed these impacts well to
date, but, whilst we expect supply chain conditions to normalise,
we remain mindful of the near-term risks to trading from input cost
and availability during the second half.
The Group is carrying good momentum into the second half and the
Board now expects adjusted EBITDA(1) for the 2021 year to be
modestly ahead of its previous expectations(2) .
Ibstock has a range of growth initiatives in development,
focused on the core business and the key industry trends of
sustainability and the industrialisation of construction processes.
We are excited about the potential in this pipeline and believe we
are well placed to deliver attractive growth and shareholder
returns into the future.
Chief Financial Officer's report
Introduction
The Group delivered a strong trading performance in the first
six months of 2021 reflecting robust market demand and good
operational execution. Performance benefited from the actions taken
during the second half of the 2020 year to restructure our
business, and the Group captured in full the cost savings arising
from these changes. Like for like revenues(1) were significantly
ahead of 2020, and around 94% of 2019 levels. Good cost discipline,
despite notable input cost inflation headwinds particularly in the
concrete division, ensured that like-for-like adjusted EBITDA
margins(1) in both divisions were back in line with 2019 margin
percentages.
The Group maintained its focus on strong financial discipline,
and strengthened further its balance sheet, with closing net
debt(1) of GBP53.5 million at 30 June resulting in a leverage(1) of
0.6 times (Dec 2020: 1.5 times).
Alternative performance measures
This results statement contains alternative performance measures
("APMs"). A description of each APM is included in Note 3 to the
financial statements. The Group uses APMs to aid comparability and
further understanding of the financial performance of the Group
between periods. The APMs represent measures used by management and
the Board to monitor performance against budget. 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.
In order to provide a more relevant performance commentary,
comparison in this statement has been made to the corresponding 6
month periods in both 2020 and 2019, the latter considered to
represent a more meaningful pre-COVID baseline for performance
comparisons.
Group results
The table below sets out segmental sales and adjusted EBITDA(1)
and margins for the six-month period:
Clay Concrete Central Total
costs
GBP'm GBP'm GBP'm GBP'm
------- --------- -------- -------
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%
Six-month period ended
30 June 2020
Total revenue 86.5 44.5 - 131.0
------- --------- -------- -------
Adjusted EBITDA(1) 7.6 5.5 (3.6) 9.5
======= ========= ======== =======
Margin 8.7% 12.5% 7.3%
Six-month period ended
30 June 2019
Total revenue 150.9 52.4 - 203.3
------- --------- -------- -------
Adjusted EBITDA(1) 51.2 10.5 (2.7) 59.0
======= ========= ======== =======
Margin 33.9% 20.0% 29.0%
(1) Alternative Performance Measures are described in Note 3 to
the results announcement .
Revenue
Group revenue in the six-month period ended 30 June 2021
totalled GBP202.0 million (2020: GBP131.0 million, 2019: GBP203.3
million). The current year period included revenues of GBP11.3
million from the Longley Concrete business (2020: GBP6.7 million;
2019: GBP nil) which was acquired during the second half of
2019.
The reported increase of 54% from 2020 reflected the steady and
sustained recovery in both new build housing and Repairs
Maintenance and Improvement (RMI) markets from the very low levels
experienced in the second quarter of 2020, which were impacted by
customers curtailing their operations in the face of the initial
impacts of the pandemic. On a like-for-like basis(1) , 2021
revenues were around 94% of 2019 levels.
In our Clay division, revenues of GBP138.3 million represented
92% of 2019 revenues of GBP150.9 million, reflecting the continued
recovery of market conditions back close to near pre-COVID levels.
Sales volumes during the period were ahead of expectations set at
the start of the year, and performance against 2019 benefited from
a modest increase in price.
In our Concrete division, revenue increased by 43% compared to
the comparative period with significant increases in all product
categories reflecting the steady and sustained recovery in
residential and infrastructure markets. On a like-for-like basis(1)
, revenues were in line with 2019, with sales volumes of
manufactured products modesty below 2019 levels (in line with our
expectations set at the start of the year), offset by a benefit
from improved pricing.
Adjusted EBITDA
Management measures the Group's operating performance using
adjusted EBITDA(1) . For the continuing operations, adjusted
EBITDA(1) increased materially to GBP54.8 million in the six-month
period ended 30 June 2021 (2020: GBP9.5 million, 2019: GBP59.0
million). The Company recognised a cost of around GBP1.7 million in
the 2021 period within adjusted EBITDA(1) relating to the repayment
of amounts received during 2020 under the Government's Coronavirus
Job Retention Scheme ("CJRS") in respect of colleagues subsequently
made redundant.
Within the Clay division, adjusted EBITDA(1) totalled GBP47.2
million (2020: GBP7.6 million; 2019: 51.2 million), representing an
EBITDA(1) margin of 34.1% (2020: 8.7%; 2019: 33.9%). The adjusted
EBITDA(1) increase over 2020 reflected the significant volume
increase and impact of operational gearing, as good fixed cost
management ensured margins recovered fully to pre-pandemic levels
despite sales volumes remaining slightly below 2019 levels.
Divisional adjusted EBITDA(1) performance benefited from a small
gain on property disposals (which largely offset the divisional
impact of repaying CJRS amounts in the period).
Adjusted EBITDA(1) in our Concrete division increased to GBP11.8
million (2020: GBP5.5 million; 2019: GBP10.5 million), as the
division continued to benefit from exposure to a broad range of
residential and infrastructure markets and resilient demand from
all key market segments. Margins of 18.5% were below 2019 margins
of 20.0% on a reported basis, reflecting the acquisition of Longley
in H2 2019, which includes a higher proportion of purchased product
within its revenue mix. On a like-for-like basis (i.e. excluding
Longley), EBITDA margins(1) of 20.6% were modestly above 2019
levels, reflecting stronger pricing and good operational execution
in the face of more challenging supply chain conditions,
particularly during the latter part of the first half.
Unallocated costs were marginally above 2020 levels at GBP4.2
million (2020 GBP3.6 million; 2019 GBP2.7 million). The increase
from prior years reflected higher variable remuneration costs, and
lower R&D credits reflecting lower qualifying spend in the
current year.
Exceptional items
Based on the application of our accounting policy for
exceptional items(1) , certain income and expense items have been
excluded from adjusted EBITDA(1) to aid shareholders' understanding
of the Group's underlying financial performance.
The amounts classified as exceptional(1) in the period totalled
a net gain of GBP5.4 million (2020: charge of GBP34.8 million),
comprising:
1. Exceptional net cash gains of GBP0.5 million (the majority
of which was cash settled in the period):
a) GBP2.0 million of exceptional cash profits arising
from disposals of land during the 2021 year;
b) GBP1.3 million of costs associated with the Group's
closure of sites;
c) GBP0.2 million of other one-off operating costs arising
directly as a result of COVID-19;
2. An exceptional non-cash credit of GBP4.9 million representing
the reversal of the previously recognised impairment of
our Atlas site which, as announced in April 2021, is now
planned for re-development
Further details of exceptional items(1) are set out in Note 5 of
the financial statements.
As set out in the 2020 Preliminary Results announcement on 10
March 2020, the Group expected to incur additional expenditure of
approximately GBP2m on final closure and decommissioning costs as
part of our single coordinated plan for the site closures which was
initiated in 2020. We continue to expect to recognise this cost by
March 2022 (having recognised GBP1.3 million in this regard during
the first six months of 2021).
Finance costs
Net finance costs of GBP2.0 million reduced from the prior year
(2020: GBP2.5 million), reflecting lower levels of average net debt
compared to the prior year offset partially by increased effective
interest rates, having extended our Revolving Credit Facility
during the final quarter of the 2020 year at interest rates
modestly above the previous agreement.
Profit before taxation
Group statutory profit before taxation was GBP38.8 million
(2020: loss of GBP52.1 million), reflecting stronger trading and
substantially lower exceptional costs.
Taxation
The Group recorded a statutory taxation charge of GBP27.9
million (2019: credit of GBP2.4 million) on a Group pre-tax profit
of GBP38.8 million (2020: loss of GBP52.1 million), resulting in an
effective tax rate ("ETR") of 71.7% (2020: 4.7%) compared with the
standard rate of UK corporation tax of 19%.
As shown in the table below, the statutory tax charge and ETR
are primarily due to the restatement of the Group's net deferred
tax liabilities following the 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.
Unaudited Unaudited
Half year ended Half year ended
30/06/2021 30/06/2020
GBPm GBPm
Profit/(loss) before taxation 38.8 (52.1)
Expected tax (charge)/credit at
statutory tax rate (7.4) 9.9
Impact of change in deferred tax (21.4) (7.7)
Changes in estimates relating to
prior periods 0.5 0.1
Other adjustments 0.4 0.1
----------------- -----------------
Total tax (charge)/credit for the
period (27.9) 2.4
================= =================
The adjusted ETR(1) (excluding the impact of the deferred tax
rate change) for the full year is estimated to be 17.6% (2020:
19.4%). The reduction in adjusted tax rate from the prior year was
due primarily to the permanent 30% benefit of the tax super
deduction (also announced in the 2021 budget), which provides
relief at the current UK headline rate for qualifying capital
expenditure, as well as certain immaterial changes to prior year
estimates.
Earnings per share
Group statutory basic earnings per share for continuing
operations of 2.7 pence in the six-month period to 30 June 2021
compared to a loss per share of 12.1 pence in the comparative
period, principally as a result of the Group's increased statutory
profit after taxation.
Group adjusted basic earnings per share(1) for continuing
operations of 7.9 pence per share increased from a 0.9 pence loss
per share in the comparative period, principally reflecting the
increased level of adjusted profit after tax. In line with prior
years, our adjusted EPS(1) metric removes the impact of exceptional
items, the fair value uplifts resulting from our acquisition
accounting and non-cash interest impacts (net of the related
taxation charge/credit). 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
2021 2020
==========================
pence pence
========================== ====== =======
Statutory basic EPS
- Continuing operations 2.7 (12.1)
========================== ====== =======
Adjusted basic EPS(1)
- Continuing operations 7.9 (0.9)
========================== ====== =======
Cash flow and net debt
Cash generated from operations during 2021 is shown in Table 2,
below. Adjusted free cash flow(1) increased to an inflow of GBP23.4
million in the year, primarily reflecting the increase in adjusted
EBITDA(1) and reduced capex spend, offset partially by increased
investment in working capital.
Tax totalling GBP4.0 million was paid in the period (2020:
GBP2.8 million). Cash conversion(1) increased to 61% in the
six-month period ended 30 June 2021 (2020: 2%), primarily as a
result of significantly increased EBITDA(1) and an investment in
working capital. Adjusted working capital movements(1) were
GBP(9.9) million (2019: outflow of GBP0.6 million) with investment
in working capital as trading volumes increased over the levels of
2020. Across the six months as a whole, inventories increased by
GBP3 million, although finished goods inventories within the clay
division remained towards the lower end of the historic range.
Table 2: Cash flow (non-statutory)
2021 2020 2019 Change Change
1Y 2Y
==========================
GBP'm GBP'm GBP'm GBP'm GBP'm
========================== ======= ======= ====== ======= ======
Adjusted EBITDA(1) 54.8 9.5 59.0 45.3 (4.2)
-------------------------- ------- ------- ------ ------- ------
Adjusted change in
working capital(1) (9.9) (0.6) (19.6) (9.3) 9.7
-------------------------- ------- ------- ------ ------- ------
Net interest (1.9) (1.2) (1.2) (0.7) (0.7)
-------------------------- ------- ------- ------ ------- ------
Tax (4.0) (2.8) (6.8) (1.2) 2.8
-------------------------- ------- ------- ------ ------- ------
Post-employment benefits (0.9) (0.9) (0.8) - (0.1)
-------------------------- ------- ------- ------ ------- ------
Other(2) (4.6) (3.8) (2.7) (0.8) (1.9)
========================== ------- ------- ------ ------- ------
Adjusted operating
cash flow 33.5 0.2 27.9 33.3 5.6
-------------------------- ------- ------- ------ ------- ------
Cash conversion(1) 61% 2% 47% 59ppt 14ppt
-------------------------- ------- ------- ------ ------- ------
Total capex (10.1) (15.0) (18.9) 4.9 8.8
========================== ------- ------- ------ ------- ------
Adjusted free cash
flow(1) 23.4 (14.8) 9.0 38.2 14.4
========================== ------- ======= ------ ------- ------
The above table excludes the cash flow relating to exceptional
items in all years.
1 Alternative Performance Measures are described in Note 3 to
the consolidated financial statements.
2 Other includes operating lease payments.
Net debt(1) (borrowings less cash) of GBP53.5 million at 30 June
2021 compared to GBP69.2 million at the prior year end.
We entered the year anticipating 2021 capital expenditure of
around GBP20 to GBP22 million, with half-year capital expenditure
of GBP10.1 million in line with this. We also expect to incur up to
GBP10 million additional capital expenditure in relation to the
recently announced Atlas investment in H2 2021.
Total cash proceeds received from land sales in H1 21 totalled
GBP4 million (2020: GBPnil).
The Group has a GBP215 million revolving credit facility with a
group of seven major banks. The five-year facility was entered into
in March 2017 and extended by a period of 12 months to March 2023
in 2020 and contains interest cover and leverage covenant limits of
4 times and 3.75 times at 30 June 2021, respectively. The Group
remained well within both covenant requirements at 30 June
2021.
Return on capital employed(1)
Return on capital employed(1) (ROCE) was 14.2% (2020: 8.0%) with
the recovery compared to 2020 principally driven by higher adjusted
EBITDA(1) in the period.
Capital allocation
As set out in our 2020 Full Year Results Announcement, the Group
remains committed to delivering sustainable, profitable growth over
the medium term.
Our capital allocation framework remains consistent with that
set out in 2020:
-- 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 around 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.
Dividend
The Board has decided to pay an interim dividend of 2.5 pence
(2020: nil; 2019: 3.2 pence), reflecting the performance and cash
generation of the business in the half, and the Board's confidence
in the longer-term outlook for the Group.
The interim dividend will be payable on 17 September 2021 to
shareholders on the register on 13 August 2021.
Pensions
At 30 June 2021, the defined benefit pension scheme ("the
scheme") was in an actuarial accounting surplus position of GBP42.5
million (31 December 2020: surplus of GBP43.6 million, 30 June
2020; surplus of GBP61.2 million). At the period end, the scheme
had asset levels of GBP601.9 million (31 December 2020: GBP639.2
million, 30 June 2020 GBP656.2 million) against scheme liabilities
of GBP559.4 million (31 December 2020: GBP595.6 million, 30 June
2020 GBP595.0 million).
The modest net reduction in the balance sheet surplus over the
period primarily reflected lower scheme assets and liability
experience losses, offset by actuarial gains arising from a change
in market conditions underlying the financial assumptions (as
detailed in Note 11).
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
During the current and prior periods, there have been no
material related party transactions.
Subsequent events
There have been no events subsequent to 30 June 2021 which, in
the opinion of management, require adjustment or disclosure.
Going concern
The Directors are required to assess whether it is reasonable to
adopt the going concern basis in preparing the interim 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 and in particular the potential on-going impact
of the COVID-19 pandemic.
The Group has prepared a reverse stress test to evaluate the
sales reduction at which the RCF covenants would be breached,
before any further mitigating actions were taken.
Having considered the conclusions to this work, the Directors
have concluded that it is reasonable to adopt a going concern basis
in preparing the interim 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 interim
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, operational disruption, economic conditions,
anticipating the market and new product development, financial risk
management, government regulation and standards relating to the
manufacture and use of building products, customer relationships
and reputation, recruitment and retention of key personnel, input
prices, product quality and cyber security. The Board continually
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 2020, 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
2021, the Board has concluded that although supply chains became
more stretched as the Group progressed through the first half, with
supply of materials, labour, and freight expected to drive
near-term pressure through the remaining six months of the year,
the Group's existing principal risks and uncertainties are broadly
unchanged from those set out in its 2020 Annual Report.
The Board has included an additional principal risk with respect
to the management of major projects. The risk reflects the Board's
view of the importance of the successful delivery of key projects
within the business, such as the redevelopment of the Atlas site in
the West Midlands and the investment to upgrade and expand capacity
at the adjacent Aldridge brick factory. The risk has a medium and
long-term impact and the Board has taken steps to enhance existing
controls to mitigate the impacts of this risk to an acceptable
level.
A full report on the Group's principal risks will be included
with the FY 2021 annual report and accounts. The Board will
continue to monitor the Group's principal risks during the
remaining six months of the year especially in relation to those
risks related to input prices and supplier management and the
recruitment and retention of personnel given the current
environment.
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.
Joe Hudson Chris McLeish
Chief Executive Chief Financial
Officer Officer
3 August 2021 3 August 2021
Condensed consolidated income statement
for the six months ended 30 June 2021
Unaudited Unaudited Audited
Notes Half year Half year Year ended
ended 30/06/2021 ended 30/06/2020 31/12/2020
------ ------------------ ------------------ ------------
GBP'000 GBP'000 GBP'000
Revenue 4 202,041 130,982 316,172
Cost of sales before exceptional
items (130,041) (114,720) (235,667)
Exceptional cost of sales 5 3,501 (31,683) (32,062)
-------------------------------------------- ------ ------------------ ------------------ ------------
Cost of sales (126,540) (146,403) (267,729)
-------------------------------------------- ------ ------------------ ------------------ ------------
Gross profit/(loss) 75,501 (15,421) 48,443
Distribution costs (19,239) (13,225) (31,427)
------------------
Administrative expenses before exceptional
items (20,225) (18,849) (35,296)
Exceptional administrative items* 5 (176) (3,080) (6,003)
-------------------------------------------- ------ ------------------ ------------------ ------------
Administrative expenses (20,401) (21,929) (41,299)
-------------------------------------------- ------ ------------------ ------------------ ------------
Profit on disposal of property, plant
and equipment before exceptional items 1,760 (29) 113
Exceptional profit on disposal of
property, plant and equipment 5 2,036 - 2,808
Total profit/(loss) on disposal of
property, plant and equipment 3,796 (29) 2,921
------ ------------------ ------------------
Other income 1,348 1,265 2,118
Other expenses (197) (201) (368)
-------------------------------------------- ------ ------------------ ------------------ ------------
Operating profit/(loss) 40,808 (49,540) (19,612)
-------------------------------------------- ------ ------------------ ------------------ ------------
Finance costs before exceptional
items (2,556) (3,049) (5,691)
Exceptional finance costs 5 - (392) (414)
Finance costs (2,556) (3,441) (6,105)
------ ------------------ ------------------
Finance income 584 892 1,777
-------------------------------------------- ------ ------------------ ------------------ ------------
Net finance cost (1,972) (2,549) (4,328)
-------------------------------------------- ------ ------------------ ------------------ ------------
Profit/(loss) before taxation 38,836 (52,089) (23,940)
-------------------------------------------- ------ ------------------ ------------------ ------------
Taxation 6 (27,863) 2,419 (4,081)
-------------------------------------------- ------ ------------------ ------------------ ------------
Profit/(loss) for the financial period 10,973 (49,670) (28,021)
-------------------------------------------- ------ ------------------ ------------------ ------------
Profit/(loss) attributable to:
Owners of the parent 10,973 (49,670) (28,021)
-------------------------------------------- ------ ------------------ ------------------ ------------
Notes pence per pence per pence per
share share share
------ ------------------ ------------------ ------------
Earnings/(loss) per share
Basic 7 2.7 (12.1) (6.8)
Diluted 7 2.7 (12.1) (6.8)
-------------------------------------------- ------ ------------------ ------------------ ------------
*see Note 2 for details of restated comparative figures
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2021
Unaudited Unaudited Audited
Notes Half year Half year Year ended
ended 30/06/2021 ended 30/06/2020 31/12/2020
------ ------------------ ------------------ ------------
GBP'000 GBP'000 GBP'000
Profit/(loss) for the financial period 10,973 (49,670) (28,021)
Other comprehensive income/(expense):
Items that will not be reclassified
to profit or loss
Remeasurement of post employment
benefit assets and obligations(2) (1,741) (28,271) (45,263)
Related tax movements(2) 6 1,127 4,697 7,927
-------------------------------------------- ------
(614) (23,574) (37,336)
-------------------------------------------- ------ ------------------ ------------------ ------------
Other comprehensive expense for the
period net of tax (614) (23,574) (37,336)
-------------------------------------------- ------ ------------------ ------------------ ------------
Total comprehensive income/(expense) for
the period, net of tax 10,359 (73,244) (65,357)
---------------------------------------------------- ------------------ ------------------ ------------
Total comprehensive income/(expense)
attributable to:
Owners of the parent 10,359 (73,244) (65,357)
-------------------------------------------- ------ ------------------ ------------------ ------------
Non-GAAP measure
Reconciliation of adjusted EBITDA(1) to Operating
(loss)/profit for the financial period:
Unaudited Unaudited Audited
Notes Half year Half year Year ended
ended 30/06/2021 ended 30/06/2020 31/12/2020
------------------ ------------------ ------------
Operating profit/(loss) 40,808 (49,540) (19,612)
------------------ ------------------ ------------
Add back fair value of energy contracts - 6,413 -
(Less)/Add back exceptional (credit)/costs
impacting EBITDA 5 (5,361) 34,763 35,257
Add back depreciation and amortisation 19,306 17,877 36,477
------------------ ------------------ ------------
Adjusted EBITDA(1) 54,753 9,513 52,122
-------------------------------------------- ------ ------------------ ------------------ ------------
(1) Alternative performance measures are described
in Note 3 to the interim financial statements.
(2) Impacting retained earnings.
Condensed consolidated balance sheet
as at 30 June 2021
Unaudited Unaudited Audited
Notes 30/06/2021 30/06/2020 31/12/2020
------ ----------- ----------- -----------
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 91,695 98,631 95,163
Property, plant and equipment 372,412 375,049 371,395
Right-of-use assets 26,311 27,986 26,653
Post-employment benefit asset 11 42,521 61,216 43,576
532,939 562,882 536,787
--------------------------------------- ------ ----------- ----------- -----------
Current assets
Inventories 66,209 70,280 63,386
Trade and other receivables 82,241 49,038 58,906
Current tax receivable - 1,730 -
Cash and cash equivalents 15,930 26,949 19,552
164,380 147,997 141,844
Assets held for sale - 1,186 1,186
Total assets 697,319 712,065 679,817
--------------------------------------- ------ ----------- ----------- -----------
Current liabilities
Trade and other payables (99,112) (67,928) (85,423)
Borrowings 9 (372) (521) (135)
Lease liabilities (6,285) (6,553) (6,728)
Derivative financial instruments 10 - (8,950) -
Current tax payable (178) - (421)
Provisions 12 (2,755) (8,562) (5,303)
(108,702) (92,514) (98,010)
--------------------------------------- ------ ----------- ----------- -----------
Net current assets 55,678 56,669 45,020
--------------------------------------- ------ ----------- ----------- -----------
Total assets less current liabilities 588,617 619,551 581,807
--------------------------------------- ------ ----------- ----------- -----------
Non-current liabilities
Borrowings 9 (69,024) (129,192) (88,601)
Lease liabilities (22,113) (23,244) (22,348)
Deferred tax liabilities (86,963) (67,629) (64,755)
Provisions 12 (8,224) (8,416) (8,232)
--------------------------------------- ------
(186,324) (228,481) (183,936)
--------------------------------------- ------ ----------- ----------- -----------
Total liabilities (295,026) (320,995) (281,946)
--------------------------------------- ------ ----------- ----------- -----------
Net assets 402,293 391,070 397,871
--------------------------------------- ------ ----------- ----------- -----------
Equity
Share capital 4,096 4,096 4,096
Share premium 4,382 4,332 4,333
Retained earnings 763,496 751,785 759,483
Merger reserve (369,119) (369,119) (369,119)
Own shares held (562) (24) (922)
Total equity 402,293 391,070 397,871
--------------------------------------- ------ ----------- ----------- -----------
Condensed consolidated statement of changes in equity
(unaudited)
for the six months ended 30 June 2021
Share Share Retained Merger Own shares Total
capital premium earnings reserve held equity
attributable
to owners
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ---------- ---------- ----------- --------------
Balance at 1 January
2021 4,096 4,333 759,483 (369,119) (922) 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 payment - - 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
to Employee Benefit
Trust - 49 - - - 49
At 30 June 2021 4,096 4,382 763,496 (369,119) (562) 402,293
-------------------------- --------- --------- ---------- ---------- ----------- --------------
Balance at 1 January
2020 4,093 7,441 822,321 (369,119) (435) 464,301
Loss for the period - - (49,670) - - (49,670)
Other comprehensive
expense - - (23,574) - - (23,574)
--------- --------- ---------- ---------- ----------- --------------
Total comprehensive
expense for the period - - (73,244) - - (73,244)
Transactions with
owners:
Share based payments - - 363 - - 363
Current tax on share
based payment - - 13 - - 13
Deferred tax on share
based payment - - (363) - - (363)
Transfer from Share
premium account - (3,109) 3,109 - - -
Issue of own shares
held on exercise of
share options - - (414) - 414 -
Issue of share capital
to Employee Benefit
Trust 3 - - - (3) -
--------- --------- ---------- ---------- ----------- --------------
At 30 June 2020 4,096 4,332 751,785 (369,119) (24) 391,070
-------------------------- --------- --------- ---------- ---------- ----------- --------------
Balance at 1 July
2020 4,096 4,332 751,785 (369,119) (24) 391,070
Profit for the period - - 21,649 - - 21,649
Other comprehensive
expense - - (13,762) - - (13,762)
--------- --------- ---------- ---------- ----------- --------------
Total comprehensive
income for the period - - 7,887 - - 7,887
Transactions with
owners:
Share based payments - - 164 - - 164
Current tax on share
based payment - - 11 - - 11
Deferred tax on share
based payment - - (323) - - (323)
Purchase of own shares - - - - (1,020) (1,020)
Issue of own shares
held on exercise of
share options - - (40) - 122 82
At 31 December 2020 4,096 4,333 759,483 (369,119) (922) 397,871
-------------------------- --------- --------- ---------- ---------- ----------- --------------
Condensed consolidated cash flow statement
for the six months ended 30 June 2021
Unaudited Unaudited Audited
Half year Half year Year ended
ended 30/06/2021 ended 30/06/2020 31/12/2020
------------------ ------------------ ------------
GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Cash generated from operations (Note
8) 38,551 5,829 55,215
Interest paid (1,519) (1,249) (4,189)
Other interest paid - lease liabilities (377) (405) (1,215)
Tax paid (4,010) (2,840) (6,478)
---------------------------------------------
Net cash inflow from operating activities 32,645 1,335 43,333
--------------------------------------------- ------------------ ------------------ ------------
Cash flows from investing activities
Purchase of property, plant and equipment (10,059) (14,972) (24,072)
Proceeds from sale of property, plant
and equipment 837 3 1,165
Proceeds from sale of property, plant
and equipment - exceptional 2,882 - 2,808
Interest received - 10 10
--------------------------------------------- ------------------ ------------
Net cash outflow from investing activities (6,340) (14,959) (20,089)
--------------------------------------------- ------------------ ------------------ ------------
Cash flows from financing activities
Dividends paid (6,547) - -
Drawdown of borrowings - 100,000 100,000
Repayment of borrowings (20,000) (75,000) (115,000)
Repayment of lease liabilities (3,649) (3,695) (6,848)
Proceeds from issuance of equity
shares 255 - 141
Purchase of own shares by Employee
Benefit Trust - - (1,020)
Net cash (outflow)/inflow from financing
activities (29,941) 21,305 (22,727)
--------------------------------------------- ------------------ ------------------ ------------
Net (decrease)/increase in cash and
cash equivalents (3,636) 7,681 517
Cash and cash equivalents at beginning
of the year 19,552 19,494 19,494
Exchange gains/(losses) on cash and
cash equivalents 14 (226) (459)
Cash and cash equivalents at end
of the year 15,930 26,949 19,552
--------------------------------------------- ------------------ ------------------ ------------
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 2021 were authorised
for issue in accordance with a resolution of the Directors on 3
August 2021. 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 2020, 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 2020 were approved by the
Board of Directors on 9 March 2021. 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 2021 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 2020 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 2020, except in respect of taxation
which is based on the expected effective tax rate that would be
applicable to expected annual earnings.
The Group is currently assessing the implications of the April
2021 IFRIC agenda decision on the treatment of configuration and
customisation costs in cloud computing arrangements. Historically,
the Group has not incurred material costs in relation to cloud
computing, although it is aware that along with growing practice,
future planned IT investment will likely rely more heavily on cloud
based software and its policies regarding accounting treatment will
need to be clarified.
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 2020, 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 2021 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 2020. In light
of the trading conditions experienced during the period ended 30
June 2021, updated market forecasts and management's expectations
of the Group's future trading performance, the going concern basis
of preparation is no longer considered a significant judgement in
preparation of the interim financial statements. The other area 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 31 June 2021.
Exceptional administrative items - restated comparatives -
Discontinued operations
During the year ended 31 December 2020, amounts of GBP104,000
relating to discontinued operations were considering insignificant
and have been incorporated within the results of continuing
operations. Exceptional administrative expenses in the period ended
30 June 2020 have been restated from GBP2,976,000 to GBP3,080,000.
No further transactions of significance are anticipated in relation
to the U.S Glen-Gery operations disposed of during the year ended
31 December 2018. As a result of the restated comparative figure,
the loss before taxation from continuing operations in the interim
period ended 30 June 2020 is restated from GBP51,985,000 to
GBP52,089,000.
Going concern
Given the continued improving trading performance of the Group,
positive external market indicators and reduced level of
uncertainty looking forward, management no longer believes that the
going concern basis of preparation represents a significant
judgement.
The Group's financial planning and forecasting process consists
of a budget for the 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 2022.
The Directors have reviewed and robustly challenged the assumptions
around future trading performance, operational and capital
expenditure and debt requirements within these forecasts including
the Group's liquidity and covenant forecasts in their going concern
assessment.
The Group's committed facilities at 30 June 2021 comprise a
syndicated Revolving Credit Facility ("RCF") of GBP215 million
which matures in March 2023. At 30 June 2021 GBP70 million was
drawn down under the RCF with GBP145 million of headroom remaining.
At 30 June 2021 covenant requirements were met with significant
headroom.
Covenants under the Group's RCF facility going forward 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.
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 the potential on-going impact of the Covid-19 pandemic, economic
conditions, and operational disruption.
Group forecasts have been prepared which reflect both actual
experienced impact of the pandemic and estimates of the future
reflecting macroeconomic and industry-wide projections, as well as
matters specific to the Group. Total capacity is anticipated to
reach up to c.95% of 2019 output levels in 2022, as capital
enhancement projects are fully commissioned.
The key uncertainty faced by the Group is the industry demand
for its products in light of macroeconomic factors; therefore, in
addition, the Group has prepared reverse stress tests to evaluate
the industry demand reduction at which it would be likely to breach
the RCF covenants, before any further mitigating actions were
taken. This test indicates that, at a cumulative reduction of 79%
in sales in H2 2021 and 40% in 2022 versus 2019 levels, the Group
would be at risk of breaching its covenants.
The Directors consider this to be a highly unlikely scenario,
and in the event of an anticipated covenant breach, the Group would
seek to take further steps to mitigate, including the disposal of
valuable land and building assets and additional restructuring
steps to reduce the fixed cost base of the Group.
Having taken account of the modelled projections, 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.
In the current period, management has introduced APMs
'like-for-like revenue' for the Concrete segment and 'like-for-like
EBTIDA margin', which it believes useful to allow comparison of the
current period's performance to the equivalent period performance
in 2019 (prior to the Group's acquisition of the Longley Concrete
operations). Additionally, an 'adjusted effective tax rate' APM has
been introduced, which removes the impact of deferred taxation rate
change and other discrete items which impact the first half of the
financial year. Management believes this APM useful in assessing
the impact of the tax rate when comparing the Group's post-tax
performance across interim and full year periods.
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. It is not intended that APMs
are a substitute for, or superior to, statutory measures. None of
the APMs are outlined within IFRS and they may not be comparable
with similarly titled APMs used by other companies.
Within the interim management report, APMs are identified with a
superscript.
Exceptional items
The Group presents items as exceptional on the face of the
income statement those items of income and expense which, because
of the materiality, nature and/or expected infrequency of the
events giving rise to them, merit separate presentation to allow
shareholders to understand better elements of financial performance
in the period, so as to facilitate comparison with future periods
and to assess trends in financial performance.
In the prior year, management further defined its policy for the
recognition of exceptional items in relation to the COVID-19
pandemic.
In order to qualify for exceptional classification, any such
items must be discrete, capable of objective segregation from
underlying cost, and be not expected to recur in subsequent
periods. Such items are included as exceptional where items have
either: a) arisen as a direct result of COVID-19; or b) arisen in a
period, or through a manner, different to that anticipated. Any
items which have been incurred within the normal course of the
Group's operations, and in the manner anticipated, throughout the
period, even if the efficiency of the related operations has been
materially reduced by COVID-19 do not meet the Group's definition
of exceptional items and are included within underlying
performance.
Details of all exceptional items are disclosed in Note 5.
Adjusted EBITDA
Adjusted EBITDA is the earnings before interest, taxation,
depreciation and amortisation adjusted for exceptional items. In
the prior interim period, the APM was adjusted to also remove fair
valuation losses on failed own use contracts. There were no such
losses in the current interim period. The Directors regularly use
Adjusted EBITDA as a key performance measure in assessing the
Group's profitability. The measure is considered useful to users of
the financial statements as it represents a common APM used by
investors in assessing a company's operating performance, when
comparing its performance across periods and in determination of
Directors' variable remuneration. A full reconciliation is included
at the foot of the Group's condensed consolidated statement of
comprehensive income within the interim condensed consolidated
financial statements.
Adjusted profit/(loss) before taxation
Adjusted profit/(loss) before taxation is the profit/(loss)
before taxation removing the impact of exceptional items and the
fair valuation losses on failed own use contracts. There were no
such losses in the current interim period. The Directors have
presented adjusted profit/(loss) before taxation as they believe
the APM represents useful information to the user of the financial
accounts in assessing the performance of the Group and when
comparing its performance across periods. A reconciliation of
adjusted profit/(loss) before taxation is provided at the foot of
the exceptional items table in Note 5.
Adjusted Effective Tax Rate ("Adjusted ETR")
The adjusted ETR is the Group's full year forecast ETR adjusted
to remove the impact of changes in the tax rate on the Group's
deferred tax provision. The Directors have presented adjusted ETR
as they believe the APM represents useful information to the user
of the financial accounts in assessing the impact of the tax rate
when comparing the Group's post-tax performance across periods. A
reconciliation of the adjusted ETR to the statutory and reported
rates of tax is set out below:
Unaudited Unaudited
Half Half
year year
ended ended
30/06/2021 30/06/2020
------------ ------------
Statutory rate of taxation in
the UK 19.0% 19.0%
Less impact of permanent differences* (0.6%) 0.2%
Less impact of changes in estimates
re. prior periods (0.8%) 0.2%
------------ ------------
Adjusted ETR 17.6% 19.4%
Less impact of difference in (1.1%) -
prior period true-up recognition
Rate change on deferred tax
provision 55.2% (14.8%)
Reported ETR 71.7% 4.6%
============ ============
* The 2021 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). During the comparative interim period, the definition was
expanded to remove fair valuation losses on failed own use
contracts in order to remove in-period distortions in the Adjusted
EBITDA arising from such contracts. For the current interim period,
these losses were GBPnil. In order to remove distortions to the
effective tax rate applied resulting from changes to the rate of
deferred taxation, management has applied the effective tax rate
prior to such changes.
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, and used within the
determination of Directors' variable remuneration. 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 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 (defined above).
The net debt to adjusted EBITDA ratio definition similarly removes
the benefit of IFRS 16 within adjusted EBITDA so as to align the
definition with the Group's banking facility covenant
definition.
The Directors disclose the net debt APM to provide information
as a useful measure for assessing the Group's overall level of
financial indebtedness and when comparing its position across
periods. Net debt and a full reconciliation of 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 income statement results for the last twelve
months and, for the consolidated balance sheet, the 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 year, assessing
performance between periods and it is 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 30/06/2021 ended 30/06/2020 31/12/2020
------------------ ------------------ ------------
GBP'000 GBP'000 GBP'000
Adjusted EBITDA 97,362 72,797 52,122
Less depreciation (30,970) (29,668) (29,046)
Less amortisation (6,936) (7,295) (7,431)
------------------ ------------------ ------------
Adjusted earnings before interest
and taxation 59,456 35,834 15,645
Average net debt 61,325 93,808 85,974
Average equity 400,082 427,686 394,471
Average pension (43,049) (74,936) (52,396)
------------------ ------------------ ------------
Average capital employed 418,359 446,557 428,049
ROCE 14.2% 8.0% 3.7%
Average capital employed figures 30 June 31 December 30 June 31 December
comprise: 2021 2020 2020 2019
------------------ ------------------ ------------ ------------
GBP'000 GBP'000 GBP'000 GBP'000
Net debt 53,466 69,184 102,764 84,851
Equity 402,293 397,871 391,070 464,301
Pension 42,521 43,576 61,216 88,656
Like-for-like revenue
In comparing the 2021 performance with that of 2019, the
Directors have disclosed 'like-for-like revenue' for the Group and
Concrete segment, which sets out the performance in the current
period without the contribution of the Longley Concrete operations,
which were acquired in July 2019. The Directors have included this
APM in order to remove the distortions arising from ownership only
in the current and prior period.
Like-for-like sales reconciliation:
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Concrete Concrete Concrete Group Group Group
segment segment segment
Half Half Half Half Half Half
year year year year year year
ended ended ended ended ended ended
30/06/2021 30/06/2020 30/06/2019 30/06/2021 30/06/2020 30/06/2019
------------ ------------ ------------ ------------ ------------ ------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 63,772 44,461 52,371 202,041 130,982 203,300
Contribution
from Longley
operations (11,253) (6,706) - (11,253) (6,706) -
--------------- ------------ ------------ ------------ ------------ ------------ ------------
Like for like
revenue 52,519 37,755 52,371 190,788 124,276 203,300
=============== ============ ============ ============ ============ ============ ============
Concrete segment like-for-like
growth H1 2021 v H1 2019 0.3%
Group like-for-like growth
H1 2021 v H1 2019 (6.2%)
Like-for-like adjusted EBITDA margin
In comparing the 2021 performance with that of 2019, the
Directors have disclosed 'like-for-like adjusted EBITDA margin for
the Concrete division, which sets out the performance in the
current period without the contribution of the Longley Concrete
operations, which were acquired in July 2019. The Directors have
included this APM in order to remove the distortions arising from
ownership only in the current and prior period.
Like-for-like adjusted EBTIDA margin reconciliation:
Unaudited Unaudited Unaudited
Half year Half year Half year
ended 30/06/2021 ended ended 30/06/2019
30/06/2020
------------------ ------------ ------------------
GBP'000 GBP'000 GBP'000
Concrete segment adjusted
EBTIDA 11,768 5,543 10,477
Contribution from Longley
operations (924) (4) -
--------------------------------- ------------------ ------------ ------------------
Like for like adjusted EBITDA 10,844 5,539 10,477
Like-for-like revenue (defined
above) 52,519 37,755 52,371
Concrete Like-for-like adjusted
EBITDA margin 20.6% 14.7% 20.0%
================== ============ ==================
Cash flow related APMs
Adjusted change in working capital
Adjusted change in working capital is the statutory change in
working capital removing cash flows associated with exceptional
items arising in the year of GBP2,089,000. The Directors use this
APM to allow shareholders to understand better elements of the
Group's working capital performance in the period, so as to
facilitate comparison with future periods and to assess trends in
financial performance. The analysis of adjusted change in working
capital is included in Table 2 of the Financial Review and the
reconciliation to the statutory cash flow statement, below.
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 GBP3,663,000 and inclusion of cash outflows
associated with post-employment benefits, interest income, proceeds
from the sale of property, plant and equipment and lease payments
reclassified from investing or financing activities of
GBP2,812,000. The Directors use this APM to allow shareholders to
understand better elements of the Group's cash flow performance in
the period, so as to facilitate comparison with future periods and
to assess trends in financial performance. The analysis of adjusted
operating cash flows is included in Table 2 of the Financial Review
and the reconciliation to the statutory cash flow statement,
below.
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. Cash
conversion is set out in Table 2 of the Financial Review and the
reconciliation to the statutory cash flow statement, below.
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. Adjusted free cash flow is reconciled in
Table 2 of the Financial Review and illustrated within the
reconciliation to the statutory cash flow statement, below.
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)
------------------------------- ---------- ------------ ----------------- ---------
Impairment charges - - - -
------------------------------- ---------- ------------ ----------------- ---------
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
=============================== ========== ============ ================= =========
Reconciliation of statutory cash flow statement
to adjusted cash flow statement
Six months ended 30 June 2020 Statutory Exceptional Reclassification Adjusted
(unaudited)
-------------------------------
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ------------ ----------------- ---------
Adjusted EBITDA (31,663) 41,176 - 9,513
------------------------------- ---------- ------------ ----------------- ---------
Change in working capital 21,091 (21,736) (645)
------------------------------- ---------- ------------ ----------------- ---------
Impairment charges 16,458 (16,458) - -
------------------------------- ---------- ------------ ----------------- ---------
Net interest (1,249) - 10 (1,239)
------------------------------- ---------- ------------ ----------------- ---------
Tax (2,840) - - (2,840)
------------------------------- ---------- ------------ ----------------- ---------
Post-employment benefits 51 (540) (386) (875)
------------------------------- ---------- ------------ ----------------- ---------
Other (108) - (3,711) (3,819)
------------------------------- ---------- ------------ ----------------- ---------
Adjusted operating cash flow 1,740 2,442 (4,087) 95
------------------------------- ---------- ------------ ----------------- ---------
Cash conversion 1%
------------------------------- ---------- ------------ ----------------- ---------
Total capex (14,972) - - (14,972)
------------------------------- ---------- ------------ ----------------- ---------
Adjusted free cash flow (13,232) 2,442 (4,087) (14,877)
=============================== ========== ============ ================= =========
Reconciliation of statutory cash flow statement
to adjusted cash flow statement
Year ended 31 December 2020 Statutory Exceptional Reclassification Adjusted
(audited)
-------------------------------
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ------------ ----------------- ---------
Adjusted EBITDA 16,865 35,257 - 52,122
------------------------------- ---------- ------------ ----------------- ---------
Change in working capital 19,945 (2,650) - 17,295
------------------------------- ---------- ------------ ----------------- ---------
Impairment charges 20,382 (20,382) - -
------------------------------- ---------- ------------ ----------------- ---------
Net interest (4,189) 414 10 (3,765)
------------------------------- ---------- ------------ ----------------- ---------
Tax (6,478) - - (6,478)
------------------------------- ---------- ------------ ----------------- ---------
Post-employment benefits 1,584 (2,902) (870) (2,188)
------------------------------- ---------- ------------ ----------------- ---------
Other (3,561) (2,808) (412) (6,781)
------------------------------- ---------- ------------ ----------------- ---------
Adjusted operating cash flow 44,548 6,929 (1,272) 50,205
------------------------------- ---------- ------------ ----------------- ---------
Cash conversion 96%
------------------------------- ---------- ------------ ----------------- ---------
Total capex (24,072) - - (24,072)
------------------------------- ---------- ------------ ----------------- ---------
Adjusted free cash flow 20,476 6,929 (1,272) 26,133
=============================== ========== ============ ================= =========
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 tax
for the Group's operating segments for the six months ended 30 June
2021 and 2020 and the year ended 31 December 2020, respectively.
Additionally, segmental assets and liabilities as at 30 June 2021,
31 December 2020 and 30 June 2020 are set out below.
Included within the unallocated and elimination columns in the
tables below are costs including share based payments and Group
employment costs. Unallocated assets and liabilities are pensions,
taxation and certain centrally held provisions. Eliminations
represent the removal of inter-company balances.
Transactions between segments are carried out at arm's length.
There is no material inter-segmental revenue and no aggregation of
segments has been applied.
Six months ended 30 June 2021
Clay Concrete Unallocated Total
& elimination
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
Exceptional items impacting
EBITDA (see 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
==========
Six months ended 30 June 2020
Clay Concrete Unallocated Total
& elimination
GBP'000 GBP'000 GBP'000 GBP'000
Total revenue 86,521 44,461 - 130,982
---------- --------- --------------- ----------
Adjusted EBITDA(1) 7,556 5,543 (3,586) 9,513
Fair value of energy contracts (6,413) - - (6,413)
Exceptional items impacting
EBITDA (see Note 5) (31,487) (2,173) (1,103) (34,763)
Depreciation and amortisation
pre fair value uplift (9,193) (3,453) (68) (12,714)
Incremental depreciation and
amortisation following fair
value uplift (2,817) (2,346) - (5,163)
Net finance costs (1,013) (204) (1,332) (2,549)
---------- --------- --------------- ----------
Loss before tax (43,367) (2,633) (6,089) (52,089)
---------- --------- ---------------
Taxation 2,419
----------
Loss for the year (49,670)
==========
Year ended 31 December 2020
Clay Concrete Unallocated Total
& elimination
GBP'000 GBP'000 GBP'000 GBP'000
Total revenue 213,197 102,975 - 316,172
---------- --------- --------------- ----------
Adjusted EBITDA(1) 43,968 15,055 (6,901) 52,122
Exceptional items impacting
EBITDA (see Note 5) (29,498) (2,518) (3,241) (35,257)
Depreciation and amortisation
pre fair value uplift (20,056) (6,454) (136) (26,646)
Incremental depreciation and
amortisation following fair
value uplift (5,152) (4,679) - (9,831)
Net finance costs (1,687) (638) (2,003) (4,328)
---------- --------- --------------- ----------
(Loss)/profit before tax (12,425) 766 (12,281) (23,940)
---------- --------- ---------------
Taxation (4,081)
----------
Loss for the year (28,021)
==========
Clay Concrete Unallocated Total
& elimination
Total segment assets GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- --------------- ----------
At 30 June 2021 513,208 138,333 45,778 697,319
At 31 December 2020 504,106 132,310 43,401 679,817
At 30 June 2020 505,381 138,481 68,203 712,065
Clay Concrete Unallocated Total
& elimination
Total segment liabilities GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- --------------- ----------
At 30 June 2021 (153,231) (56,002) (85,793) (295,026)
At 31 December 2020 (127,573) (54,584) (99,789) (281,946)
At 30 June 2020 (126,558) (44,906) (149,531) (320,995)
Seasonality
Historically, activity of the Group's trading operations occurs
throughout the year and is largely unaffected by seasonal factors.
The year ending 31 December 2020 was influenced by the UK economic
recovery from the disruption arising as a result of the COVID-19
pandemic and as a result the period to 30 June accounted for 41.4%
of the Group's annual revenue and 18.3% of the Group's annual
adjusted EBITDA. However, in the year ended 31 December 2019, the
period to 30 June accounted for 49.7% of the Group's annual revenue
and 48.2% of the Group's annual adjusted EBITDA. Absent further
significant disruption as a result of the COVID-19 pandemic,
management anticipates a distribution of revenue and adjusted
EBITDA weighted modestly towards the first half.
5. EXCEPTIONAL ITEMS(1)
Unaudited Unaudited Audited
Half year Half year Year ended
ended 30/06/2021 ended 30/06/2020 31/12/2020
------------------ ------------------ ------------
GBP'000 GBP'000 GBP'000
Exceptional cost of sales
Impairment reversal/(charges)
- Property, plant and equipment 4,899 (14,801) (16,263)
Impairment charges - Right-of-use
assets - (1,681) (1,681)
Impairment charges - working
capital - (2,663) (2,438)
------------------ ------------------ ------------
Total impairment charges 4,899 (19,145) (20,382)
Energy contract losses - (6,537) (5,160)
Redundancy costs - (6,001) (6,073)
Other costs associated with
closure of sites (1,398) - (447)
------------------ ------------------ ------------
Total exceptional cost of sales 3,501 (31,683) (32,062)
Exceptional administrative expenses:
Pension closure costs - legal
and actuarial costs - (540) (1,902)
GMP equalisation costs - - (1,000)
Redundancy savings/(costs) 11 (2,057) (2,224)
COVID-19 administrative expenses (187) (379) (818)
Exceptional items relating to
discontinued operations - (104) (59)
------------------ ------------------ ------------
Total exceptional administrative
expenses (176) (3,080) (6,003)
Exceptional profit on disposal
of property, plant and equipment 2,036 - 2,808
------------------ ------------------ ------------
Exceptional items impacting
adjusted EBITDA 5,361 (34,763) (35,257)
Exceptional finance costs - (392) (414)
Total exceptional items 5,361 (35,155) (35,671)
================== ================== ============
Reconciliation of adjusted profit/(loss)
before taxation(1) :
Profit/(loss) before taxation 38,836 (52,089) (23,940)
Add back exceptional items (5,361) 35,155 35,671
Fair value of energy contracts - 6,413 -
Adjusted profit/(loss) before
taxation(1) 33,475 (10,521) 11,731
================== ================== ============
Period ended 30 June 2021
Included within the current period are the following exceptional
items:
Exceptional cost of sales
Impairment reversals arose in the current period following the
Group's announcement in April 2021 to redevelop its Atlas
manufacturing site within the Clay segment. The redevelopment
utilises the existing building asset that was impaired in the prior
interim period following the Group's restructuring activity in
response to the deterioration in near-term demand outlook caused by
the COVID-19 pandemic. The current period impairment reversal
returns the asset to its depreciated recoverable value as at 30
June 2021. Due to the initial impairment charge treatment as
exceptional items, the reversal is similarly categorised as
exceptional.
Other costs associated with the closure of sites represent other
costs incurred as a result of the Group's restructuring decisions
during the 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.
Exceptional administration charges
Redundancy credits arising in the current period relate to
savings achieved by the Group as a result of decisions to retain
employees, who had initially been notified of redundancy. Due to
the initial restructuring charge treatment as exceptional, the
reversal is similarly categorised as an exceptional item.
COVID-19 administrative costs in the current period relate to
costs incurred in acquiring personal protective and health
screening equipment associated with the return to work, and the
costs of acquiring information technology equipment to be used in
the short-term during the COVID-19 lockdown. These costs were
categorised as exceptional in 2H 2020 and 1H 2021 due to the
non-recurring nature of the event giving rise to the costs. In
future periods, such costs will no longer be categorised as
exceptional as these activities become the 'new normal'.
Exceptional profit on disposal of property, plant and
equipment
The exceptional profit on disposal relates to the sale of the
Group's surplus property near Kingswinford. The profit on disposal
has been categorised as exceptional due to the materiality of the
amount recorded.
Tax on exceptional items
In the current period, the reversal of impairment charges
relating to property, plant and equipment is not tax deductible but
gives rise to a deferred tax charge in the current period. The
costs associated with the closure of sites and the COVID-19
administrative expenses are tax deductible in the current period
whilst the credit relating to redundancy costs are taxable in the
period. The profit on disposal of property, plant and equipment
gives rise to a chargeable gain which is taxable in the current
period.
Six-month period ended 30 June 2020 and year ended 31 December
2020
Details of exceptional items included within the prior interim
and full year periods are disclosed within Note 5 of the Group's
2020 interim results and 2020 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.
In the March 2021 Budget Statement, the Chancellor of the
Exchequer announced measures which included an increase in the
standard rate of corporation tax from 19% to 25% with effect from 1
April 2023. This rate change gives rise to an increase in the
Group's deferred tax liabilities of GBP21.4m. This restatement is
recognised in full in the current period and results in an increase
in the effective tax rate of 55.2% from 16.5% to 71.7%.
Another key measure announced in the Budget was the introduction
of a new temporary enhancement to tax relief on capital expenditure
on plant and machinery, known as the "super-deduction". This new
measure gives rise to both a permanent and timing cash tax benefit
in the year of expenditure at the current tax rate of 19%. This
overall benefit is reduced in part due to the associated deferred
tax liability being recognised at 25%, being the future tax rate at
which it is expected to unwind.
7. EARNINGS PER SHARE
The basic earnings per share figures are calculated by dividing
profit for the year attributable to the Parent shareholders by the
weighted average number of Ordinary Shares in issue during the
year.
The diluted earnings per share figures allow for the dilutive
effect of the conversion into Ordinary Shares of the weighted
average number of options outstanding during the year. Where the
average share price for the year is lower than the option price the
options become anti-dilutive and are excluded from the
calculation.
The number of shares used for the earnings per share calculation
are as follows:
Unaudited Unaudited Audited
Half year Half year Year ended
ended ended 31/12/2020
30/06/2021 30/06/2020
(000s) (000s) (000s)
------------ ------------ ------------
Basic weighted average number of Ordinary
Shares 409,146 409,200 409,333
Effect of share incentive awards and options 1,145 1,897 1,989
------------ ------------ ------------
Diluted weighted average number of Ordinary
Shares 410,291 411,097 411,322
---------------------------------------------- ------------ ------------ ------------
The calculation of adjusted earnings per share(1) is a key
measurement used by management that is not defined by IFRS. The
adjusted EPS measures should not be viewed in isolation, but rather
treated as supplementary information.
Adjusted earnings per share(1) is defined in Note 3 and a
reconciliation of the statutory profit to that used in the adjusted
earnings per share(1) calculations is as follows:
Unaudited Unaudited Audited
Half year Half year Year ended
ended ended 31/12/2020
30/06/2021 30/06/2020
GBP000 GBP000 GBP000
--------------------------------------------- ------------ ------------ ------------
Profit/(loss) for the period attributable
to the parent shareholders 10,973 (49,670) (28,021)
(Less)/Add back exceptional (credit)/costs
(Note 5) (5,361) 35,155 35,671
Add back/(less) tax charge/(credit) on
exceptional items 946 (6,843) (6,119)
Add fair value adjustments (Note 4) 5,460 5,163 9,831
Less tax credit on fair value adjustments (963) (1,005) (1,693)
Add back/(less) net non-cash interest 76 952 (954)
(Less)/add back tax (credit)/expense on
non-cash interest (13) (185) 164
Add back fair valuation of energy contracts - 6,413 -
Less tax credit on fair valuation of energy - (1,257) -
contracts
Less impact of difference in prior year (419) - -
tax true-up recognition
Add back impact of deferred taxation rate
change 21,430 7,671 7,667
--------------------------------------------- ------------ ------------ ------------
Adjusted profit/(loss) for the period
attributable to the parent shareholders 32,129 (3,606) 16,546
Unaudited Unaudited Audited
Half year Half year Year ended
ended ended 31/12/2020
30/06/2021 30/06/2020
pence pence pence
--------------------------------------------- ------------ ------------ ------------
Basic EPS on profit/(loss) for the period 2.7 (12.1) (6.8)
Diluted EPS on profit/(loss) for the period 2.7 (12.1) (6.8)
Adjusted basic EPS on profit/(loss) for
the period 7.9 (0.9) 4.0
Adjusted diluted EPS on profit/(loss)
for the period 7.8 (0.9) 4.0
8. NOTES TO THE GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
Half year Half year Year ended
ended 30/06/2021 ended 30/06/2020 31/12/2020
------------------ ------------------ ------------
Cash flows from operating GBP'000 GBP'000 GBP'000
activities
-------------------------------------- ------------------ ------------------ ------------
Profit/(loss) before taxation 38,836 (52,089) (23,940)
Adjustments for:
Depreciation 15,838 13,914 29,046
Impairment of property plant
and equipment (4,899) 14,777 16,263
Impairment of right-of-use
assets - 1,681 1,681
Impairment of working capital - - 2,438
Amortisation of intangible
assets 3,468 3,963 7,431
Finance costs 1,972 2,549 4,328
(Gain)/loss on disposal of
property, plant and equipment (3,796) 29 (2,921)
Research and development expenditure
credit (750) (500) (1,167)
Share based payments 295 363 527
Post-employment benefits (424) 51 1,584
------------------ ------------------ ------------
50,540 (15,262) 35,270
(Increase)/decrease in inventory (2,823) 14,047 18,503
(Increase)/decrease in trade
and other receivables (21,227) 9,050 (877)
Increase/(decrease) in trade
and other creditors 13,520 (17,095) (2,537)
(Decrease)/increase in provisions (1,459) 15,089 4,856
Cash generated from operations 38,551 5,829 55,215
-------------------------------------- ------------------ ------------------ ------------
During the prior interim and full year periods, Government
assistance of GBP8.9 million and GBP10.5 million, respectively, was
received in relation to the Coronavirus Job Retention Scheme
("CJRS"). In the current interim period, GBP1.7 million of CJRS
assistance received in relation to employees subsequently made
redundant was repaid by the Group.
At 30 June 2020 payment of taxes totalling GBP16.5 million
relating to employment taxes, income taxes and value added tax were
deferred. All deferred taxes were fully settled as at 31 December
2020.
During the six months ended 30 June 2021, the Group acquired
assets with a cost of GBP10.1 million (period ended 30 June 2020:
GBP15.0 million; year ended 31 December 2020: GBP24.1 million).
Assets of GBP2.0 million were disposed of during the current period
for proceeds of GBP3.7 million (period ended 30 June 2020: GBP0.2
million for proceeds of GBP0.1 million; year ended 31 December
2020: GBP1.1 million for proceeds of GBP4.0 million). Capital
expenditure commitments for which no provision has been made were
GBP73.7 million at 30 June 2021 (30 June 2020: GBP23.1 million; 31
December 2020: GBP11.8 million).
9. BORROWINGS, AND MOVEMENTS IN CASH AND NET DEBT
At 30 June 2021, the Group held a Revolving Credit Facility
("RCF") for GBP215 million. The RCF, which is due to expire in
March 2023, attracts interest at LIBOR plus a margin ranging from
200-350bps depending upon the ratio of net debt to Adjusted
EBITDA(1) (prior to the impact of IFRS 16).
The facility contains debt covenant requirements of leverage
(net debt to Adjusted EBITDA(1) ) and interest cover (adjusted
EBITDA(1) to net finance charge) of 3x and 4x, respectively, to be
tested semi-annually on 30 June and 31 December in respect of the
preceding 12-month period.
In June 2020, in order to provide appropriate financial
flexibility, the Group agreed covenant amendments with its lending
banks. Under these amendments, the leverage test as at 30 June 2021
only was amended to no more than 3.75 times net debt to adjusted
EBITDA(1) .
In the prior year, the Group was confirmed as eligible to access
funding under the Covid Corporate Financing Facility ("CCFF"). The
Group did not utilise the CCFF.
Unaudited Unaudited Audited
30 June 30 June 31 December
2021 2020 2020
========== ========== ============
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 15,930 26,949 19,552
Current
Revolving Credit Facility (372) (521) (135)
---------- ---------- ------------
(372) (521) (135)
Non-current
Revolving Credit Facility (69,024) (129,192) (88,601)
---------- ---------- ------------
(69,024) (129,192) (88,601)
Net debt (53,466) (102,764) (69,184)
========== ========== ============
Net debt to adjusted EBITDA
ratio
Net debt (53,466) (102,764) (69,184)
Last 12 months adjusted EBITDA(1) 97,362 72,797 52,122
Impact of IFRS 16 (6,983) (7,253) (6,832)
---------- ---------- ------------
Adjusted EBITDA(1) prior to
IFRS 16 90,379 65,544 45,290
0.6x 1.6x 1.5x
========== ========== ============
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 2021, 31 December 2020 and 30 June 2020, the Group's
fair value measurements were categorised as Level 2, except for
quoted investments within the Group's pension (valued at
GBP177,055,000 at 30 June 2021, GBP193,334,000 at 31 December 2020
and GBP151,042,000 at 30 June 2020), which were valued as Level
1.
The Group has a long standing practice of locking in prices for
gas and electricity used in the Group's production activities and
achieves this by committing to a certain volume of consumption in
future months which creates a contractual commitment and secures a
certain price.
In the prior interim period, because of the significant
reduction in activity levels due to the COVID-19 pandemic and
resulting production shutdown, the Group had energy contracts which
failed the own use scope exemption in IFRS 9 ("the failed own use
contracts"). These failed own use contracts were fair valued
("marked to market") and recognised as a derivative liability on
the balance sheet as at 30 June 2020.
In the prior interim period, the Group presented as exceptional
that element of the failed own use contracts for which it did not
take delivery of the energy, but rather sold back (at a loss) in
the market. This amounted to GBP6.5 million in the six-month period
ended 30 June 2020 and GBP5.2 million in the year ended 31 December
2020, in respect of contracts which expired in 2020 (see Note
5).
A derivative liability at 30 June 2020 of GBP9.0 million was
recognised, which represented the energy costs which were expected
to be used in H2 2020, but where the associated contract failed the
own use contract scope exemption. The Directors do not believe the
isolated incidence in the prior year of net settling such contracts
and the resultant failed own use contracts, precludes the use of
the own use exemption for similar contracts in the current and
future periods. As such, in the current period, the Group expects
to take delivery of the contracted energy purchases and the related
executory contracts are accounted for in the period in which the
gas and electricity is consumed, at the contracted price. At 30
June 2021 and 31 December 2020, the Group held no 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 2021, the Scheme surplus of GBP43.6
million decreased to a surplus of GBP42.5 million. Analysis of
movements during the six-month period ended 30 June 2021:
GBP'000
Scheme surplus at 1 January
2021 (audited) 43,576
Charge within labour costs
and operating profit (451)
Interest income 262
Remeasurement due to:
- Change in financial assumptions 45,993
- Change in demographic assumptions (1,315)
- Experience losses (17,066)
- Return on plan assets (29,353)
Company contributions 875
Scheme surplus at 30 June 2021
(unaudited) 42,521
=========
The slight worsening in the balance sheet position over the
period is primarily due to losses arising from updates to the
underlying data and demographic assumptions to reflect more recent
information from the formal actuarial valuation of the scheme at 30
November 2020. This impact was partially offset by positive returns
from return-seeking assets and contributions paid in by the Group
over the period.
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 2020. The assumptions
have been updated based on market conditions at 30 June 2021:
Unaudited Unaudited Audited
30 June 30 June 31 December
2021 2020 2020
Per annum Per annum Per annum
Discount rate 1.80% 1.40% 1.20%
RPI inflation 3.25% 2.85% 2.90%
CPI inflation 2.55% 2.35% 2.20%
Rate of increase in pensions
in payment 3.65% 3.45% 3.50%
Mortality assumptions: life
expectation at age 65
For male currently aged 65 21.8 years 21.6 years 21.6 years
For female currently aged 65 24.5 years 23.9 years 23.9 years
For male currently aged 40 23.6 years 23.5 years 23.5 years
For female currently aged 40 26.3 years 25.9 years 25.9 years
Commutation factors - sample
factor at age 65 17.31 17.31 17.31
12. PROVISIONS
The Group's provisions are set out within the below table:
Unaudited Unaudited Audited
30 June 30 June 31 December
2021 2020 2020
========== ========== ============
GBP'000 GBP'000 GBP'000
Restoration (i) 4,521 4,295 4,575
Dilapidations (ii) 4,829 4,869 4,913
Restructuring (iii) 57 7,814 2,406
Other (iv) 1,572 - 1,641
10,979 16,978 13,535
---------- ---------- ------------
Current 2,755 8,562 5,303
Non-current 8,224 8,416 8,232
10,979 16,978 13,535
---------- ---------- ------------
(i) The restoration provision comprises obligations governing
site remediation and improvement costs to be incurred in compliance
with applicable environmental regulations together with
constructive obligations stemming from established practice once
the sites have been fully utilised. The key estimates associated
with calculating the provision relate to the cost per acre to
perform the necessary remediation work as at the reporting date
together with determining the year of retirement. Climate change is
considered at the planning stage of developments when restoration
provisions are initially estimated. This includes projection of
costs associated with future water management requirements and the
form of the ultimate expected restoration activity. Estimates are
updated annually based on the total estimated available reserves
and the expected extraction rates. Whilst a significant element of
the total provision will reverse in the medium-term (two to ten
years), the majority of the legal and constructive obligations
applicable to mineral-bearing land will unwind over a 30-year
timeframe. In discounting the related obligations, expected future
cash outflows have been determined with due regard to extraction
status and anticipated remaining life.
(ii) Provisions for dilapidations arose as contingent
liabilities recognised upon the business combination in the period
ended 31 December 2015, are recognised on a lease by lease basis
and are based on the Group's best estimate of the likely
contractual cash outflows, which are estimated to occur over the
lease term.
(iii) The restructuring provision comprises obligations arising
as a result of the site closures and associated redundancy costs
announced following the completion of the Group's review of
operations during the second half of 2020. The key estimate
associated with the provision relates to the redundancy cost per
impacted employee. The majority of the remaining cost is expected
to be incurred within one year of the balance sheet date.
(iv) Other provisions include provisions for legal and warranty
claim costs, which are expected to be incurred within one year of
the balance sheet date.
13. RELATED PARTY TRANSACTIONS
In the six-month period ended 30 June 2021
There were no related party transactions during the six-month
period ended 30 June 2021 nor any balances with related parties at
30 June 2021.
In the six-month period ended 30 June 2020
There were no related party transactions during the six-month
period ended 30 June 2020 nor any balances with related parties at
30 June 2020.
14. DIVIDENDS PAID AND PROPOSED
A final dividend for 2020 of 1.6 pence per ordinary share (2019:
nil) was paid on 14 May 2021. The Directors have declared an
interim dividend of 2.5 pence per ordinary share in respect of 2021
(2020: nil), amounting to a dividend of GBP10.2 million (2020:
nil). The interim dividend will be paid on 17 September 2021 to all
shareholders on the register at close of business on 13 August
2021.
These condensed consolidated financial statements do not reflect
the 2021 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
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 2021 which comprises the consolidated
condensed income statement, the consolidated condensed statement of
changes in 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. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, 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.
As disclosed in note 2, the annual financial statements of the
group will be prepared in accordance with United Kingdom adopted
International Financial Reporting 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".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 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.
Conclusion
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 2021 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.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 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
3 August 2021
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END
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