Focus on extracting greater value, to accelerate performance as our markets recover

  • Fundamental drivers underpinning demand in our markets remain firmly in place.

  • The Group is developing opportunities to accelerate its recovery as conditions normalise over the medium term by extracting higher value:

    • From our existing portfolio - Building on the launch of the "One Ibstock" brand by integrating our Group-wide sales and commercial functions into a single team to drive improved customer-centricity and cross-selling

    • From our factory network - The combined effect of our investment projects and targeted closures will result in a permanent net capacity increase of up to 5% within our clay brick manufacturing network compared to 2022, with significant improvements in efficiency, productivity and environmental performance

    • From new product development - Our Nostell investment will provide a step change in capacity for brick slips, a key pillar in our growing portfolio of building envelope technologies within Ibstock Futures, targeting high growth market niches

    • From our unrivalled clay reserves - Further progress made towards the production of calcined clay for use as a low-carbon cementitious replacement, with further discussions with potential commercial partners expected in 2024

Current trading and outlook

  • Activity in the early weeks of 2024 has been in line with the subdued levels seen in the latter part of the 2023 year; while remaining cautious, we currently anticipate a degree of improvement as the year progresses

  • Significant action on fixed cost will deliver a year-on-year benefit of £15 million in 2024, broadly equivalent to the benefit in 2023 from fixed cost absorption into finished goods inventories

  • With the factory network running at lower levels of utilisation, the Group will retain a level of elevated fixed cost in 2024, which preserves our ability to build back quickly as markets recover

  • We anticipate year-on-year inflation across the cost base as a whole in 2024 albeit at a more modest rate than 2023. We will continue to monitor and respond to cost and pricing dynamics through the year

  • The continued strength of the balance sheet provides both resilience and optionality in respect of future growth investments

  • Despite the cautious outlook for 2024, the Group remains confident in its ability to continue to respond to market conditions, and to deliver strong growth and continued cash generation over the medium term as markets recover

Joe Hudson, Chief Executive Officer, commented:

"We have delivered a resilient performance for the year in what have been very difficult market conditions, and I am proud of the way that colleagues across the Group have responded in such challenging circumstances. Our results reflect both continued strong execution and the difficult but decisive actions taken to reduce headcount and realign capacity with near term market conditions. The organisational changes implemented during the second half of the 2023 year have created a leaner, more customer-focused business, which will deliver an enduring benefit for years to come.

"In doing so, we have also created a platform to accelerate innovation, with a particular focus on the sustainability of our products and processes. In combination with the strength of our brand and unrivalled product portfolio in the UK construction marketplace, we believe this will unlock significant value over the years ahead.

"As we focus on doing the right things to respond to market conditions in the near term, we are moving towards completion of the key investment projects that will underpin our growth as the market recovers. Our investment in new low cost, efficient and more sustainable brick capacity at our Atlas facility, and a significant capacity expansion in the fast-growing brick slips market, are on track and will support our medium-term growth objectives.

"Activity in the early weeks of 2024 has continued to reflect the more subdued demand environment experienced throughout the latter part of 2023. As we look further ahead, it is clear that market fundamentals remain supportive, with significant unmet demand for new build housing in the UK. The Group's conviction in its medium-term prospects is underpinned by an expectation of a return to normalised conditions within its core markets combined with the incremental returns generated from our significant capital investment programme. Although the timing of this recovery is uncertain, Ibstock is well positioned to benefit and to deliver on our growth targets over the medium term.

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Ibstock plc published this content on 06 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 March 2024 17:13:08 UTC.