TIDMIBST
RNS Number : 1323R
Ibstock PLC
03 November 2021
3 November 2021
Ibstock plc
Q3 Trading Update - strong trading and further strategic
progress
Launch of Ibstock Futures and GBP50m investment to create new
automated brick slip systems factory
Ibstock plc ('Ibstock' or the 'Group'), a leading UK
manufacturer of clay bricks and concrete products, is today
announcing a trading update for the quarter ended 30 September 2021
and the creation of a new business unit, Ibstock Futures, to
accelerate its growth plans.
Trading update
-- Strong Q3 performance supported by continued robust demand in core markets
-- Supply chain impacts well managed, with both divisions delivering a resilient operational
performance
-- Our expectations for adjusted EBITDA for the 2021 financial year remain unchanged
-- Atlas wire cut factory redevelopment on track with planning now secured
Strategic growth
-- Launch of Ibstock Futures; a new business unit established to capture growth opportunities
in new, fast growth sectors of the UK construction market
-- GBP50m investment to create the UK's first automated brick slip systems factory in West Yorkshire
-- Investment will significantly increase Ibstock's presence in the fast growing market for brick
slip clad walling systems in the offsite and modular construction sectors
-- Net zero carbon brick slips to be in production by early 2024
Joe Hudson, Chief Executive Officer of Ibstock plc
commented:
"Trading in the third quarter remained strong, with robust
demand continuing across both the housebuilding and RMI markets.
While, as expected, supply chain conditions have become more
challenging, we have managed the impacts well and continue to work
closely with our customers on service levels. Despite the more
difficult supply chain backdrop, we remain confident of delivering
an outcome for the year in line with our previous guidance.
"The launch of Ibstock Futures is an important strategic
development for the Group and will directly address a number of
exciting growth markets that complement our existing offer for
conventional building methods as the focus on sustainability and
the industrialisation of construction processes gathers pace. This
investment in brick slips manufacturing capacity at scale will be a
first for the UK and will enable us to take a leadership position
in this fast-growing market. The Nostell plant is the first of a
pipeline of growth initiatives we have in development for Ibstock
Futures and we are excited about the potential this new business
has to accelerate growth in the years ahead."
Trading update
The Group continued to perform well during the third quarter,
against a background of strong demand in both the new build and
repair, maintenance and improvement ("RMI") markets.
Supply chain impacts, particularly relating to the availability
of freight and labour, were well managed, with both divisions
delivering a resilient operational performance during the period.
Product price increases were implemented successfully against a
backdrop of significant input cost inflation, primarily in the
categories of energy, freight, carbon and materials.
As a result, the Group is confident in delivering adjusted
EBITDA for the 2021 financial year in line with its previous
guidance.
Looking to 2022, whilst macro conditions are expected to remain
dynamic, the Group continues to be confident in its ability to make
significant further strategic and financial progress. Ibstock's
hedging policy positions it well against a backdrop of increasing
energy prices: the Group's energy requirements are fully hedged for
the remainder of 2021, with around 80 percent hedged for 2022.
The redevelopment of our Atlas wire cut clay brick facility in
the West Midlands is progressing well with planning approvals
secured, equipment orders placed and construction work underway.
The project is on track to commission, as expected, by the end of
2023.
As part of the commitment to sector leadership in ESG, the Group
is establishing more ambitious targets for carbon reduction and
expects to announce these before the end of the year. The Group
also continues to explore opportunities to use alternative, lower
carbon, fuels in its manufacturing processes.
New business unit established to accelerate growth in UK
construction markets
Alongside its strong trading momentum over the last 12 months,
and in line with its strategic objectives, the Group has made
significant progress in identifying opportunities to accelerate its
growth and diversify its revenue base by targeting fast growing
areas of the UK construction market. In particular, the Group is
targeting technologies, products and solutions aligned to two key
trends that will transform our industry over the long term:
sustainability and the industrialisation of construction
processes.
The potential markets for these technologies and systems are
substantial and growing faster than the wider building products
industry. Furthermore, manufacturing of the target products is
typically less capital intensive, enabling the Group to develop
with greater agility and speed.
To capitalise on this opportunity, Ibstock is today announcing
the launch of a new business unit, Ibstock Futures. Ibstock Futures
will target an immediate opportunity to increase the Group's
presence in façade products and solutions for the fast-growing
off-site and modular construction markets in both the new build and
re-cladding markets, with products suitable for a wide range of
residential, commercial and mixed-use applications. Furthermore,
the new business unit is developing a range of projects across the
construction value chain and will also focus on leveraging the
Group's competitive position to drive value through its
sustainability credentials, including potential alternative uses
for its existing clay reserves.
Ibstock's expectation for the business unit, which will be
headquartered at the Group's London I-studio, is to scale revenues
rapidly over the next five years, delivering growth through a
combination of both organic and inorganic investment.
The Group will give a more detailed update on Ibstock Futures
with the full year results in March 2022.
GBP50m investment to create the UK's first automated brick slips
factory
As Ibstock Futures' launch project, the Group is today
announcing plans to build the UK's first automated brick slip
systems factory in Nostell, West Yorkshire. Brick slips provide a
durable, safe and energy efficient alternative to other cladding
solutions. The UK market for brick slips is significant, with
annual volumes of circa 120 million slips, and is growing fast. The
addition of a significant brick slip capability will be highly
complementary to the Group's existing clay brick business and the
investment will enable Ibstock to take a leadership position in the
market, significantly increasing its presence in the fast growing
mid and high-rise construction sectors.
The planned GBP50 million capital investment will provide
capacity for up to 60 million brick slips per annum. An initial
investment of around GBP38 million, providing capacity to produce
30 million brick slips, will be spread evenly across 2022 and 2023,
with the factory commissioning in late 2023. The second phase of
investment is expected to be made shortly thereafter as additional
capacity is required. EBITDA from the initial investment is
expected to be at least GBP10 million per annum once the plant is
operating at expected capacity levels from 2025. The investment is
expected to deliver a return on capital employed (ROCE) at least in
line with the Group average.
The factory will be constructed within the existing footprint of
the Group's Nostell facility, which operated as a brick factory
until its closure in 2020. The facility benefits from significant
adjacent clay reserves and established infrastructure, and is well
situated within the heartland of its anticipated key markets. The
planning application process has commenced, and construction on
site is expected to start during Q1 2022.
The new factory will manufacture a wide range of different brick
slip types and associated systems, and will incorporate the latest
manufacturing technology to deliver a very significant reduction in
carbon compared to both imported and domestically cut slips. In
combination with high-quality offset projects, this will result in
Nostell producing the UK's first net-zero carbon brick slip.
Analyst Call
Ibstock is hosting an audio webcast for investors and analysts
at 0900 UK time today.
To register for the webcast, please click here
The presentation can also be heard via a conference call, where
there will be the opportunity to ask questions.
Conference Call Dial-In Details: +44 (0)330 336 9127
Confirmation code: 6708115
An archived version of today's call will be available on
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
Holly Gillis
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.
About Brick Slips
Brick slips are clay bricks with an adapted thickness for use
with a variety of cladding systems across both off-site and on-site
construction. Slips deliver the same appearance as clay brickwork
and are suitable for external or internal applications. Brick slips
offer an attractive, durable and safe alternative for cladding
large residential and commercial buildings, a market that is seeing
significant growth.
At present, automated plants in continental Europe supply around
two-thirds of the brick slips used in the UK, with the remainder
cut manually from facing bricks in the UK.
The visual aesthetic and flexibility of clay brick slips and
their contribution to improved construction speed are making the
product increasingly popular with architectural specifiers. The
clay brick slip market is expanding rapidly and brick slip volumes
are expected to grow significantly over the next 5 years, with
slips increasingly used in multi-storey urban buildings as the
façade of choice, using a variety of panel-based cladding
systems.
Clay brick slips are also a preferred façade for the growing
market for manufactured panel cladding systems for use in offsite
manufactured residential housing units and offer a safe,
non-combustible solution for recladding applications.
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END
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