TIDMFORT
RNS Number : 0767W
Forterra plc
30 July 2018
30 July 2018
FORTERRA PLC
2018 HALF YEAR RESULTS
Forterra plc, a leading UK producer of manufactured masonry
products, announces half year results for the six months ended 30
June 2018.
Six months ended Year ended
30 June 31 December
Change
2018 2017 % 2017
GBPm GBPm GBPm
Revenue 180.0 162.7 10.6% 331.0
EBITDA 39.2 38.7 1.3% 75.4
Operating profit 33.5 33.6 (0.3)% 64.5
PBT before exceptionals* 32.3 31.4 2.9% 61.1
Profit before tax 32.3 31.4 2.9% 59.3
EPS before exceptionals*
(pence) 13.0 12.6 3.2% 24.5
Net debt 51.9 69.4 60.8
Dividend - interim /
total (pence) 3.3 3.1 6.5% 9.5
* an exceptional finance charge of GBP1.8m was incurred in
second half of 2017. There were no exceptional items in first half
of 2018 and 2017
HIGHLIGHTS
-- Increase in sales of 10.6% due to the Bison acquisition in H2
2017, higher aircrete block volumes and price increases applied to
offset cost inflation
-- Profit before tax ahead of prior year by 2.9% due to a good
performance from Bricks & Blocks and a lower finance cost
-- Precast concrete business result affected by slow
industry-wide recovery from the severe weather in Q1, which slowed
the integration of the newly acquired Bison business
-- Good cash flow performance resulting in further reduction of
net debt to GBP51.9m at 30 June 2018, representing 0.7 times last
twelve months EBITDA
-- Major expansion project announced to build new brick facility
at Desford with a capacity of 180m bricks pa, more than doubling
current site capacity at a capital cost of GBP90-95m
-- Interim dividend declared of 3.3 pence per share, an increase of 6.5% over 2017
Stephen Harrison, Chief Executive Officer, commented:
"The Group delivered a solid performance in the first half,
supported by a good result from the Brick and Block product
lines.
"Continued levels of activity from the new build single unit
residential market lead us to anticipate a Brick and Block
performance in line with our expectations for the second half. The
outlook for Bespoke Products is predicated on the expected recovery
of precast sales and the conversion of the order book into
deliveries as that segment of the market recovers. As a result we
anticipate the Group's profit before tax for the full year to be in
line with the Board's expectations"
ENQUIRIES
Forterra plc +44 1604 707 600
Stephen Harrison, Chief Executive Officer
Shatish Dasani, Chief Financial Officer
FTI Consulting +44 203 727 1340
Richard Mountain / Nick Hasell
A presentation for analysts will be held today, 30 July 2018, at
8.45am at the offices of FTI Consulting. A recorded audiocast of
the presentation will be available on the Investors section of our
website (http://www.forterraplc.co.uk) later in the day.
ABOUT FORTERRA PLC
Forterra is a UK leader in manufactured masonry products, with a
unique combination of strong market positions in clay bricks and
concrete blocks. The Group also has a leadership position in the
precast concrete products market operating under the well-known
Bison precast brand.
Within our clay bricks business, Forterra focuses on the
efficient manufacture of high volume extruded and soft mud bricks,
primarily for the housing market. The business is also the sole
manufacturer of the iconic Fletton brick sold under the London
Brick brand. Fletton bricks were used in the original construction
of nearly a quarter of England's existing housing stock and are
today used to match existing brickwork by homeowners carrying out
extension or improvement work. Within our concrete blocks business,
Forterra is one of the leading producers of both aircrete and
aggregate blocks, the former being sold under one of the country's
principal aircrete brands of Thermalite.
BUSINESS REVIEW
RESULTS FOR THE HALF YEAR
Revenue in the first half of 2018 was GBP180.0m, an increase of
10.6% against the comparative period for 2017 reflecting in part
the acquisition of the Bison business completed in September 2017.
The underlying increase in revenue was due to higher aircrete block
volumes and the price increases applied across all product lines to
offset cost inflation. As previously indicated, precast concrete
volumes were below our plan as the construction industry strived to
catch up with the effects of the severe weather at the end of Q1,
and this was reflected more acutely in multi-unit housing and
larger infrastructure projects. However, order levels for precast
have been broadly in line with our plan suggesting that the sales
shortfall is due to activity levels at certain types of building
sites. Brick volumes were also disrupted by the weather although
the catch-up in single unit housing during the second quarter was
better, resulting in overall volumes being largely flat against a
particularly strong prior period comparative.
Earnings before interest, tax, depreciation and amortisation
(EBITDA) for the first half of GBP39.2m was GBP0.5m ahead of the
comparative period due to a good overall performance from the
bricks and blocks businesses which offset a disappointing result
from the precast concrete business.
The Bespoke Products business contributed GBP0.7m EBITDA in the
first half compared with GBP3.0m in the comparative period due to
the lower than plan sales volumes as described above which made the
integration of the Bison business more challenging. Capacity
utilisation at Swadlincote has increased but this has been hampered
by yard space due to a build-up of inventory resulting from
customer site construction delays. A leadership change has been
made and the team is focused on executing a clear plan which will
deal with the short term industry issues, successfully integrate
Bison and drive improved future performance.
Although the Bricks and Blocks segment margin held up well, the
overall Group EBITDA margin of 21.8% was lower than last half year
(23.8%) due to the diluting effect of the Bespoke Products business
performance.
Profit before tax was GBP0.9m higher than last half year at
GBP32.3m reflecting the trading performance and a lower finance
cost due to reduced debt levels and the refinancing of the
borrowings facility in July 2017, offset partly by an increased
depreciation charge.
OUTLOOK
The Group delivered a solid performance in the first half,
supported by a good result from the Brick and Block product
lines.
Continued levels of activity from the new build single unit
residential market lead us to anticipate a Brick and Block
performance in line with our expectations for the second half. The
outlook for Bespoke Products is predicated on the expected recovery
of precast sales and the conversion of the order book into
deliveries as that segment of the market recovers. As a result we
anticipate the Group's profit before tax for the full year to be in
line with the Board's expectations.
EARNINGS PER SHARE AND DIVID
Earnings per share was 13.0 pence per share, an increase of 3.2%
over the prior half year due to the higher profit and also the
benefit of a lower effective tax rate of 19.7% compared with 20.0%
in 2017.
The Board has declared an interim dividend of 3.3 pence per
share, an increase of 6.5% over the interim paid last year. The
dividend will be paid on 11 October 2018 to shareholders on the
register at 21 September 2018.
CASH FLOW, BORROWINGS AND FACILITIES
The Group continues to generate a strong level of operating
cashflow, delivering GBP24.0m in the first half (2017: GBP31.8m).
Working capital increased as anticipated due to higher sales
arising from the spring selling season and the Bison acquisition.
Capital expenditure was GBP6.0m including GBP2.5m on expansion
capex at the Hams Hall aircrete facility and the bricks facilities
at Accrington and Desford.
As announced in March, the Group commenced the market purchase
of its shares through the Employee Benefit Trust in order to have
sufficient shares to fulfil the requirements of the vesting of
various share schemes. During the first half, 720,000 shares were
purchased at a cost of GBP2.2m to beheld by the EBT.
The operating cash generation, capital investment and the share
purchases resulted in a further reduction in net debt of GBP8.9m to
GBP51.9m at 30 June 2018.
Net debt to EBITDA (calculated with reference to the last twelve
months of earnings) reduced further to 0.7 times at 30 June 2018
compared with 0.8 times at 31 December 2017 and 2.2 times at IPO in
April 2016.
STRATEGY IMPLEMENTATION
The Group's objective of generating sustainable shareholder
value is achieved through delivery of the following strategic
priorities:
-- drive for a flexible and efficient manufacturing base,
aligning capacity to market conditions;
-- maintain strong market positions in our core products; and
-- expand the range of products and services offered through
both organic and appropriate bolt-on acquisitions.
These priorities are underpinned by having high performing
people throughout the business and continuing to strengthen
customer relationships.
The UK brick market has grown strongly over recent years, and
capacity utilisation has increased. As outlined previously, we have
prioritised debottlenecking projects at four sites in order to
increase capacity by around 40 million bricks which has been less
capital-intensive, whilst increasing plant efficiency and reducing
unit production costs. The last of these projects is planned to be
completed at our facility in Accrington, Lancashire during this
year.
The next phase of expanding brick capacity to meet market demand
through redeveloping the site at Desford in Leicestershire was
announced in May 2018. The planning application for the project has
now been submitted and involves building a new factory capable of
producing up to 180m bricks per annum to replace the existing
facility which has an annual production capacity of 85m bricks. The
existing plant will remain operational until the new facility built
alongside is completed. Subject to planning consent being received,
it is anticipated that the new plant will be commissioned in late
2021 and that the capital expenditure of GBP90-95m will be spent
over the period 2019 to 2022.
The acquisition of the Bison business in September 2017 has
enabled us to take a leadership position in the UK precast concrete
business whilst also reducing capacity constraints. Once
successfully integrated, Bison precast will deliver value due to
continued growth in the housing market, a greater level of
construction in the private rented and social housing segments, and
an increase in the use of off-site manufactured structural precast
concrete.
BRICKS AND BLOCKS
Six months ended Year ended
30 June 31 December
Change
2018 2017 % 2017
GBPm GBPm GBPm
Revenue 132.4 123.7 7.0% 249.5
EBITDA 38.5 35.7 7.8% 69.1
EBITDA margin 29.1% 28.9% 27.7%
Revenue in the first half increased by 7.0% compared with prior
half year. Activity levels were affected in the first quarter by
the severe weather, and there was a catch-up from April onwards
although this was tempered by the availability of labour within the
construction industry and distribution capacity. Aircrete volumes
increased strongly following the weakness seen in the first half of
2017 and the reversal of the substitution by aggregate blocks.
Consequently aggregate block volumes reduced to more normal levels.
Brick sales volumes were largely flat overall for the half year
reflecting both the impact of the weather and also a strong
comparative performance last half year. Price increases were
applied across the product range to offset the effect of input cost
inflation.
EBITDA increased by GBP2.8m due to the higher revenue and
disciplined cost management. Brick production increased by double
digits reflecting the resumption of full production at Claughton
and Accrington, and also the benefit of the debottlenecking
projects. The effect of higher cost of energy and carbon credits
was mitigated in the first half by the forward purchases of energy
previously put in place, however there will be a small adverse
effect in the second half and further higher cost in 2019.
The project to convert the Hams Hall, Birmingham aircrete
facility to use conditioned (wet) Pulverised Fuel Ash (PFA) as well
as dry PFA was successfully completed in July 2018 at a capital
cost of GBP2.2m, and the plant has resumed production. The Group
has entered into a long term contract to purchase conditioned PFA,
and implementation of this project will provide greater flexibility
and resilience of production for aircrete blocks.
The upgrade of the kiln at the Desford brick facility was
completed in early 2018 to budget and added an extra 5m bricks per
annum to the plant capacity prior to the major expansion project
planned for Desford. The debottlenecking project at Accrington is
planned to be carried out in the second half, leading to an
increase in capacity of 10m bricks per annum.
BESPOKE PRODUCTS
Six months ended Year ended
30 June 31 December
Change
2018 2017 % 2017
GBPm GBPm GBPm
Revenue 48.5 40.0 21.3% 83.6
EBITDA 0.7 3.0 (76.7)% 6.3
EBITDA margin 1.4% 7.5% 7.5%
The increase in revenue for Bespoke Products of 21.3% compared
with last half year was primarily due to the inclusion of the Bison
Swadlincote facility acquired in September 2017. As outlined above,
sales volumes of precast concrete were below plan due to the severe
weather in the first quarter and with low recovery rates thereafter
as construction sites strived to catch up. The increased sales
volumes of products into single unit housing suggests that sites
have prioritised the completion of these over multi-occupancy
units. Market data suggests that our business held its own and the
issue was across the industry. Order levels continued broadly in
line with plan, providing comfort that the sales issue is one of
timing of despatches to customer sites.
The reduced sales volumes has meant that the integration of the
Bison Swadlincote facility has been more challenging. Capacity
utilisation at the plant has increased through winning new orders
and transfer of product lines from the other two facilities, but
this has been restricted by the delays in delivering manufactured
products and limited stock yard capacity. We have also experienced
some operational issues at one of our existing plants which has led
to reduced productivity in the first half.
As described above, a leadership change has been made and the
team is focused on executing a clear plan which will deal with the
short term industry issues, successfully integrate Bison and drive
improved future performance.
Both the Redbank roofing products business and the Formpave
concrete paving business made a positive contribution in the first
half, although their performance was also affected by the market
conditions described above. Redbank is progressing a number of
initiatives to both develop its existing product range and
introduce new products in related markets.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties facing the business are
detailed in pages 38-41 of the Annual Report and Accounts published
in April 2018, which are available on the Group website
(forterraplc.co.uk). The Group has reviewed these risks and
concluded that they have not materially changed since the date of
the annual report and are not expected to materially change in the
remaining six months of the financial year.
GOING CONCERN
Having made enquiries and reviewed the Group's plans and
available financial facilities, the Board has a reasonable
expectation that the group has adequate resources to continue in
operation for the foreseeable future, being a period of not less
than 12 months from the date of this report. Accordingly, it
continues to adopt the going concern basis in preparing the interim
statement.
FORWARD LOOKING STATEMENTS
Certain statements in this half yearly report are forward
looking. Although the Group believes that the expectations
reflected in these forward looking statements are reasonable, we
can give no assurance that these expectations will prove to have
been correct. Because these statements contain risks and
uncertainties, actual results may differ materially from those
expressed or implied by these forward looking statements.
We undertake no obligation to update any forward looking
statements, whether as a result of new information, future events
or otherwise.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE
INTERIM REPORT
We confirm to the best of our knowledge:
-- the condensed consolidated set of financial statements has
been prepared in accordance with IAS 34 Interim Financial Reporting
as adopted by the EU;
-- 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 their impact on the condensed
set of financial statements; 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
material related party transactions that have taken place in the
first six months of the current financial year and any material
changes in the related party transactions described in the annual
report.
By order of the Board
Stephen Harrison Shatish Dasani
Chief Executive Officer Chief Financial Officer
30 July 2018
INDEPENT REVIEW REPORT TO FORTERRA PLC
Introduction
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 2018 which comprises Condensed
Consolidated Income Statement, Condensed Consolidated Statement of
Financial Position, Condensed Consolidated Statement of Changes in
Equity, Condensed Consolidated Statement of Cashflows and related
notes 1 - 14. 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.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
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 are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
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 Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, 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 2018 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
30 July 2018
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE HALF YEARED 30 JUNE 2018 (UNAUDITED)
Six months ended Year ended
30 June 31 December
Note 2018 2017 2017
Unaudited Unaudited Audited
GBPm GBPm GBPm
Revenue 6 180.0 162.7 331.0
Cost of sales (110.1) (94.4) (196.8)
Gross profit 69.9 68.3 134.2
Distribution costs (25.2) (24.4) (48.9)
Administrative expenses (10.8) (10.4) (21.2)
Other operating (expense)/income (0.4) 0.1 0.4
Operating profit 33.5 33.6 64.5
EBITDA 39.2 38.7 75.4
Depreciation and amortisation (5.7) (5.1) (10.9)
Operating profit 33.5 33.6 64.5
---------------------------------- ----- ---------- ---------- -------------
Finance expense before
exceptional items (1.2) (2.2) (3.4)
Exceptional finance expense - - (1.8)
---------- ---------- -------------
Net finance expense 7 (1.2) (2.2) (5.2)
---------------------------------- ----- ---------- ---------- -------------
Profit before tax 32.3 31.4 59.3
Income tax expense (6.4) (6.3) (11.8)
Profit for the financial
period attributable to
equity shareholders 25.9 25.1 47.5
========== ========== =============
Total comprehensive income
for the period attributable
to equity shareholders 25.9 25.1 47.5
========== ========== =============
Earnings per share:
Basic (in pence per share) 8 13.0 12.6 23.8
Diluted (in pence per
share) 8 12.8 12.4 23.4
The notes on pages 13 to 20 are an integral part of these
condensed consolidated financial statements.
All results relate to continuing operations.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018 (UNAUDITED)
As at As at
30 June 31 December
Note 2018 2017 2017
Unaudited Unaudited Audited
GBPm GBPm GBPm
Assets
Non-current assets
Intangible assets 16.7 13.9 15.8
Property, plant and equipment 164.4 144.5 165.2
Deferred tax assets - 0.1 -
181.1 158.5 181.0
---------- ---------- -------------
Current assets
Inventories 36.7 37.2 36.3
Trade and other receivables 56.9 46.0 33.0
Cash and cash equivalents 27.9 69.3 29.0
121.5 152.5 98.3
Total assets 302.6 311.0 279.3
========== ========== =============
Current liabilities
Trade and other payables (82.5) (56.7) (61.2)
Income tax liabilities (5.9) (6.1) (5.8)
Loans and borrowings 10 (0.4) (10.6) (0.4)
Provisions for other liabilities
and charges (7.1) (5.8) (7.9)
---------- ---------- -------------
(95.9) (79.2) (75.3)
---------- ---------- -------------
Non-current liabilities
Loans and borrowings 10 (79.4) (128.1) (89.4)
Provisions for other liabilities
and charges (9.2) (8.8) (9.1)
Deferred tax liabilities (1.2) - (0.8)
(89.8) (136.9) (99.3)
Total liabilities (185.7) (216.1) (174.6)
---------- ---------- -------------
Net assets 116.9 94.9 104.7
========== ========== =============
Capital and reserves attributable
to equity shareholders
Ordinary shares 2.0 2.0 2.0
Retained earnings 116.8 92.9 102.7
Reserve for own shares (1.9) - -
Total equity 116.9 94.9 104.7
========== ========== =============
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF YEARED 30 JUNE 2018 (UNAUDITED)
Reserve
Share for own Retained Total
capital shares earnings equity
GBPm GBPm GBPm GBPm
Current half year:
Balance at 1 January 2018 2.0 - 102.7 104.7
========= ========= ========== ========
Total comprehensive income
for the financial period - 25.9 25.9
Dividend payable - - (12.8) (12.8)
Share-based payments - - 1.3 1.3
Payments to acquire own
shares - (2.2) - (2.2)
Exercise of options - 0.3 (0.3) -
--------- --------- ---------- --------
Balance at 30 June 2018 2.0 (1.9) 116.8 116.9
========= ========= ========== ========
Prior half year:
Balance at 1 January 2017 2.0 - 67.2 69.2
========= ========= ========== ========
Total comprehensive income
for the financial period - - 25.1 25.1
Share-based payments - - 0.6 0.6
Balance at 30 June 2017 2.0 - 92.9 94.9
========= ========= ========== ========
Balance at 1 January 2017 2.0 - 67.2 69.2
========= ========= ========== ========
Total comprehensive income
for the year - - 47.5 47.5
Dividends paid - - (13.8) (13.8)
Share-based payments - - 1.2 1.2
Tax on share-based payments - - 0.6 0.6
Balance at 31 December
2017 2.0 - 102.7 104.7
========= ========= ========== ========
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF YEARED 30 JUNE 2018 (UNAUDITED)
Six months ended Year ended
30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBPm GBPm GBPm
Cash flows from operating activities
Operating profit before exceptional
items 33.5 33.6 64.5
Adjustments for:
Depreciation and amortisation 5.7 5.1 10.9
Non-cash movement on provisions 1.4 0.6 3.1
Share-based payments 1.4 0.6 1.5
Profit on sale of property, plant
and equipment - - (0.4)
Changes in working capital:
Inventories (0.4) 1.8 3.0
Trade and other receivables (23.9) (14.4) (1.4)
Trade and other payables 8.4 5.0 9.5
Cash movement on provisions (2.1) (0.5) (0.5)
---------- ---------- -------------
Cash generated from operations 24.0 31.8 90.2
Interest paid (1.0) (2.0) (3.3)
Tax paid (5.9) (3.7) (9.3)
Net cash inflow from operating activities 17.1 26.1 77.6
---------- ---------- -------------
Cash flows from investing activities
Cash outflow on business combinations - - (20.0)
Purchase of property, plant and
equipment (4.9) (2.2) (9.0)
Purchase of intangible assets (1.1) (0.8) (1.8)
Proceeds from sale of property,
plant and equipment - - 0.6
Net cash used in investing activities (6.0) (3.0) (30.2)
---------- ---------- -------------
Cash flows from financing activities
Dividends paid - - (13.8)
Drawdown of borrowings - - 100.0
Repayment of borrowings (10.0) (10.0) (160.0)
Finance arrangement fees paid - - (0.8)
Cash payments to acquire equity
shares (2.2) - -
Net cash (used in)/generated from
financing activities (12.2) (10.0) (74.6)
---------- ---------- -------------
Net (decrease)/increase in cash
and cash equivalents (1.1) 13.1 (27.2)
Cash and cash equivalents at beginning
of the period 29.0 56.2 56.2
Cash and cash equivalents at the
end of the period 27.9 69.3 29.0
========== ========== =============
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEARED 30 JUNE 2018 (UNAUDITED) (CONTINUED)
1. GENERAL INFORMATION
Forterra plc ('Forterra' or the 'Company') and its subsidiaries
(together referred to as the 'Group') are domiciled in the UK. The
address of the registered office of the Company and its
subsidiaries is 5 Grange Park Court, Roman Way, Northampton,
England, NN4 5EA. The Company is the parent of Forterra Holdings
Limited and Forterra Building Products Limited, which together
comprise the group (the 'Group'). The principal activity of the
Group is the manufacture and sale of bricks, dense and lightweight
blocks, precast concrete, concrete block paving and other
complementary building products.
The condensed consolidated financial statements were approved by
the Board on 30 July 2018.
The condensed consolidated financial statements for the six
months ended 30 June 2018 and comparative period have not been
audited. The auditor has carried out a review of the financial
information and their report is set out on page 8.
The condensed consolidated financial statements do not
constitute financial statements and do not include all the
information and disclosures required within full annual financial
statements. The condensed consolidated financial statements are not
statutory accounts as defined by Section 434 of the Companies Act
2006. Financial Statements for the year ended 31 December 2017 were
approved by the Board of Directors on 14 March 2018, delivered to
the Registrar of Companies and include an explicit and unreserved
statement of compliance with EU-adopted IFRS. The Auditor's report
was (i) unqualified, (ii) did not include a reference to any
matters to which the Auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 of the Companies Act 2006.
2. BASIS OF PREPARATION
The condensed consolidated financial statements for the half
year ended 30 June 2018 have been prepared in accordance with the
Disclosure and Transparency Rules of the UK Financial Conduct
Authority (DTR), and the requirements of IAS 34 Interim Financial
Reporting.
The condensed consolidated financial statements do not include
all the information and disclosures required in annual financial
statements and they should be read in conjunction with the Group's
Financial Statements for the year ended 31 December 2017 and any
public announcements made by Forterra plc during the interim
period.
The condensed consolidated financial statements are prepared on
the historical cost basis.
Going concern basis
Management forecasts and projections take account of reasonably
possible changes in trading performance and provide comfort that
the Group is able to operate within its current cash reserves,
borrowings and committed facilities. The directors therefore have a
reasonable expectation that the Group has sufficient resources to
continue in existence for the foreseeable future, being a period of
not less than 12 months from the date of this report. Accordingly,
they continue to adopt the going concern basis in preparing the
condensed consolidated financial statements
3. ACCOUNTING POLICIES
The accounting policies adopted in the preparation of the
condensed consolidated financial statements are consistent with
those followed in the preparation of the Group's financial
statements for the year ended 31 December 2017, except as disclosed
below.
The following new standards became applicable in the reporting
period;
IFRS 9 - Financial Instruments (effective 1 January 2018)
IFRS 9 makes changes to accounting for financial instruments in
the areas of classification and measurement, impairment and hedge
accounting. There is no impact on the classification or measurement
of financial instruments for the Group as a result of IFRS 9 and
hedge accounting is not applied. IFRS 9 replaces the incurred
credit loss impairment model for financial assets in IAS 39 with an
expected credit loss model. This has no impact on the Group
financial statements due to the short term nature of
receivables.
IFRS 15 - Revenue from contracts with customers (effective 1
January 2018)
In 2017 a detailed review of contracts was carried out to
identify and analyse the impact of IFRS 15 on the Group. A further
review has been carried out in 2018 and reconfirmed that, whilst
the nature of contracts in the bespoke products segment is
different to that of the bricks and blocks segments in that they
are typically made to measure or custom orders, the timing of the
transfer of control is unchanged. Therefore revenue recognition and
profit before tax are not impacted by the implementation of IFRS
15.
IFRS 16 - Leases (effective 1 January 2019)
IFRS 16 will impact the treatment of the operating leases held
by the Group, with these leases being recognised on the balance
sheet in future periods. Work to assess the full impact of IFRS 16
remains ongoing.
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
4. JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with
adopted IFRSs requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
In preparing these condensed consolidated financial statements,
the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the consolidated
financial statements of Forterra plc for the year ended 31 December
2017.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimates are revised if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both current and future
periods.
5. SEASONALITY OF OPERATIONS
The Group is subject to seasonality consistent with the general
construction market, with stronger volumes witnessed across the
spring and summer months when conditions are more favourable.
6. SEGMENTAL REPORTING
Management has determined the operating segments based on the
management reports reviewed by the Executive Committee (comprising
the executive team responsible for the day-to-day running of the
business) that are used to assess both performance and strategic
decisions. Management has identified that the Executive Committee
is the chief operating decision maker in accordance with the
requirements of IFRS 8 'Operating segments'.
The Executive Committee considers the business to be split into
three operating segments: Bricks, Blocks and Bespoke Products.
The principal activity of the operating segments are:
-- Bricks - Manufacture and sale of bricks to the construction
sector
-- Blocks - Manufacture and sale of concrete blocks to the
construction sector
-- Bespoke Products - Manufacture and sale of bespoke products
to the construction sector
The Executive Committee considers that, for reporting purposes,
the operating segments above can be aggregated into two reporting
segments: Bricks and Blocks and Bespoke Products. The aggregation
of Bricks and Blocks is due to these operating segments having
similar long-term average margins, production process, suppliers,
customers and distribution methods.
The Bespoke Products range includes precast concrete, permeable
paving, chimney and roofing solutions, each of which are typically
made-to-measure or customised to meet the customer's specific
needs. The precast concrete flooring products are complemented by
the Group's full design and nationwide installation services, while
certain other bespoke products, including permeable paving and
chimney flues, are complemented by the Group's bespoke
specification and design service.
Costs which are incurred on behalf of both segments are held at
the centre and these, together with general administrative
expenses, are allocated to the segments for reporting purposes
using a split of 75% Bricks and Blocks and 25% Bespoke Products.
Management considers that this is an appropriate basis for the
allocation.
The revenue recognised in the condensed consolidated income
statement is all attributable to the principal activity of the
manufacture and sale of bricks, both dense and lightweight blocks,
precast concrete, concrete paving and other complimentary building
products.
Substantially all revenue recognised in the condensed
consolidated income statement arose from contracts with external
customers within the UK.
Segment revenue and results:
Six months ended 30 June
2018
Bricks Bespoke
& Blocks products Total
GBPm GBPm GBPm
Segment revenue 132.4 48.5 180.9
Intercompany eliminations (0.9)
------
Revenue 180.0
------
EBITDA 38.5 0.7 39.2
Depreciation and amortisation (4.6) (1.1) (5.7)
Operating profit 33.9 (0.4) 33.5
Net finance expense (1.2)
------
Profit before tax 32.3
======
Segment assets:
As at 30 June 2018
Bricks Bespoke
& Blocks products Total
GBPm GBPm GBPm
Property, plant and equipment 130.3 34.1 164.4
Intangible assets 8.9 7.8 16.7
Inventories 29.9 6.8 36.7
Segment assets 169.1 48.7 217.8
Unallocated assets 84.8
------
Total assets 302.6
======
Other segment information:
As at 30 June 2018
Bricks Bespoke
& Blocks products Total
GBPm GBPm GBPm
Property, plant and equipment
additions 4.3 0.6 4.9
Intangible asset additions 0.8 0.3 1.1
Segment revenue and results:
Six months ended 30 June
2017
Bricks Bespoke
& Blocks products Total
GBPm GBPm GBPm
Segment revenue 123.7 40.0 163.7
Intercompany eliminations (1.0)
------
Revenue 162.7
------
EBITDA 35.7 3.0 38.7
Depreciation and amortisation (4.7) (0.4) (5.1)
------
Operating profit 31.0 2.6 33.6
Net finance expense (2.2)
------
Profit before tax 31.4
======
Segment assets:
As at 30 June 2017
Bricks Bespoke
& Blocks products Total
GBPm GBPm GBPm
Property, plant and equipment 129.5 15.0 144.5
Intangible assets 7.5 6.4 13.9
Inventories 33.6 3.6 37.2
---------- ---------- ------
Segment assets 170.6 25.0 195.6
Unallocated assets 115.4
------
Total assets 311.0
======
Other segment information:
As at 30 June 2017
Bricks Bespoke
& Blocks products Total
GBPm GBPm GBPm
Property, plant and equipment
additions 1.6 0.7 2.3
Intangible asset additions 0.2 0.1 0.3
Segment revenue and results:
Year ended 31 December 2017
Bricks Bespoke
& Blocks products Total
GBPm GBPm GBPm
Segment revenue 249.5 83.6 333.1
Intercompany eliminations (2.1)
-------
Revenue 331.0
-------
EBITDA 69.1 6.3 75.4
Depreciation and amortisation (9.6) (1.3) (10.9)
Operating profit 59.5 5.0 64.5
Net finance expense (5.2)
-------
Profit before tax 59.3
=======
Segment assets:
As at 31 December 2017
Bricks Bespoke
& Blocks products Total
GBPm GBPm GBPm
Property, plant and equipment 130.7 34.5 165.2
Intangible assets 8.1 7.7 15.8
Inventories 30.5 5.8 36.3
---------- ---------- ------
Total segment assets 169.3 48.0 217.3
Unallocated assets 62.0
------
Total assets 279.3
======
Other segment information:
As at 31 December 2017
Bricks Bespoke
& Blocks products Total
GBPm GBPm GBPm
Property, plant and equipment
additions 7.3 1.4 8.7
Property, plant and equipment
acquired on business combination - 20.0 20.0
Intangible asset additions 1.1 0.3 1.4
Intangible assets acquired on
business combination - 1.2 1.2
7. NET FINANCE EXPENSE
Year ended
Six months ended 31
30 June December
2018 2017 2017
GBPm GBPm GBPm
Interest payable on external
borrowings (1.2) (2.2) (3.4)
IPO capitalised financing costs
written off - - (1.8)
-----------
(1.2) (2.2) (5.2)
========= ======== ===========
The Group reports non-trading income or expenditure as
exceptional where the size, nature or function of an item, or
aggregation of similar items, is such that separate presentation is
relevant to an understanding of its financial position. Following
the refinancing of the Group's borrowings facility during 2017 the
balance of the capitalised financing costs incurred at IPO was
written off.
8. EARNINGS PER SHARE
Basic earnings per share (EPS) is calculated by dividing the
profit for the period attributable to shareholders of the parent
entity by the weighted average number of ordinary shares
outstanding during the period. Diluted earnings per share
additionally allows for the effect of the conversion of the
dilutive options.
Six months ended Year ended
30 June 31 December
2018 2017 2017
Basic Basic Basic
GBPm GBPm GBPm
Operating profit for
the period 33.5 33.6 64.5
Net finance expense (1.2) (2.2) (5.2)
--------- -------- -------------
Profit before taxation 32.3 31.4 59.3
Tax charge (6.4) (6.3) (11.8)
--------- -------- -------------
Profit for the period 25.9 25.1 47.5
========= ======== =============
Number of ordinary shares
in issue (millions) 199.8 200.0 200.0
Effect of share incentive
awards and options 3.1 2.5 2.9
--------- -------- -------------
Diluted weighted average
number of ordinary shares 202.9 202.5 202.9
========= ======== =============
Earnings per share
Basic (in pence) 13.0 12.6 23.8
Diluted (in pence) 12.8 12.4 23.4
Earnings per share before exceptionals for 2017 has been
calculated by adding back GBP1.8m of exceptional finance costs and
tax related to this:
Earnings per share before exceptionals
Basic (in pence) 13.0 12.6 24.5
Diluted (in pence) 12.8 12.4 24.1
9. DIVIDS
A dividend of 6.4 pence per share that relates to the period
ending 31 December 2017 was paid on 5 July 2018, making a total
distribution of 9.5 pence per share for 2017.
An interim dividend of 3.3 pence per share (2017: 3.1 pence per
share) has been declared by the Board and will be paid on 11
October 2018 to shareholders on the register at 21 September 2018.
This interim dividend has not been recognised as a liability at 30
June 2018. It will be recognised in shareholders equity in the
financial statements for the year ended 31 December 2018.
10. LOANS AND BORROWINGS
As at As at
30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Non-current loans and borrowings:
External bank loans - principal (80.0) (130.0) (90.0)
- unamortised debt issue costs 0.6 1.9 0.6
(79.4) (128.1) (89.4)
------- -------- -------------
Current loans and borrowings:
External bank loans - principal - (10.0) -
- interest (0.4) (0.6) (0.4)
(0.4) (10.6) (0.4)
------- -------- -------------
(79.8) (138.7) (89.8)
======= ======== =============
On 26 July 2017 the Group refinanced by repaying amounts
outstanding under existing facilities and entering into a committed
GBP150m revolving credit facility with a new group of leading
banks. The new facility was extended by a year over the original
facility and therefore is in place until July 2022. An accordion
facility of GBP50m was also agreed.
Interest is payable on amounts drawn down under the agreement at
a rate of LIBOR plus a variable margin ranging from 1.25% to
2.25%.
The facilities are secured by fixed charges over the shares of
Forterra Building Products Limited and Forterra Holdings
Limited.
11. NET DEBT
As at As at
30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Cash and cash equivalents 27.9 69.3 29.0
Loans and borrowings (79.8) (138.7) (89.8)
-------
Net debt (51.9) (69.4) (60.8)
======= ======== =============
Reconciliation of net cash flow to net debt
Six months ended Year ended
30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
Net cash inflow from operating
activities 17.1 26.1 77.6
Net cash outflow from investing
activities (6.0) (3.0) (30.2)
Dividends paid - - (13.8)
--------- -------- -------------
Net cash flow in period 11.1 23.1 33.6
Other movements (2.2) (0.2) (2.1)
--------- -------- -------------
Decrease in net debt 8.9 22.9 31.5
Net debt at the start of the
period (60.8) (92.3) (92.3)
--------- -------- -------------
Net debt at the end of the
period (51.9) (69.4) (60.8)
========= ======== =============
12. SHARE-BASED PAYMENTS
In March 2018, 658,999 share awards were granted under the
Performance Share Plan (PSP) to the Executive Directors, other
members of the Executive Committee and designated senior management
which vest three years after the date of grant at an exercise price
of 1 pence per share. The total number of shares vesting is
dependent upon both service conditions being met and the
performance of the Group over the three-year period. Performance is
subject to both TSR and EPS conditions, each weighted 50%.
In addition, 76,990 shares were awarded in March 2018 under the
Deferred Annual Bonus Scheme, deferring a portion of the 2017
executive directors' bonus as outlined in the Annual Report on
Remuneration in the Group's Annual Report and Accounts for the year
ended 31 December 2017.
13. RELATED PARTY TRANSACTIONS
Six months ended Year ended
30 June 31 December
2018 2017 2017
Transactions with related parties: GBPm GBPm GBPm
Purchases from related parties - (1.0) (1.0)
Lone Star Funds and its affiliates had a majority holding in
Forterra plc up until 25 April 2017. On this date, Lone Star Funds
completed the full sell-down of its shareholding.
Up to 25 April 2017, related parties were entities under common
ownership of Lone Star Funds. All related party transactions and
balances were undertaken in the normal course of business and on an
arm's length basis.
14. POST BALANCE SHEET EVENTS
No events have occurred since the balance sheet date that would
merit separate disclosure.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR PGUBUMUPRGMM
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