Forterra Plc · LSE:FORT
Forterra — FY2021 Earnings Presentation
41 slides from Forterra's earnings presentation, Mar 10, 2022
Slide 1: Forterra plc Full Year Results Presentation
FORTERRA PLC FULL YEAR RESULTS PRESENTATION 1 10 MARCH 2022
Slide 2: Disclaimer
DISCLAIMER This document has been prepared by Forterra plc (the “Company”) solely for use at a presentation in connection with the Company’s Results Announcement in respect of the financial period ended 31 December 2021 (the “Presentation”). For the purposes of this notice, “Presentation” shall mean
Slide 3: Agenda
AGENDA 1. Highlights 2. Financial review 3. Our markets 4. Strategic update 5. Sustainability 6. Outlook 7. Investment case Stephen Harrison Ben Guyatt Chief Executive Officer Chief Financial Officer Keeping Britain Building 3
Slide 4: Financial Highlights
FINANCIAL HIGHLIGHTS • Strong trading throughout the year with FY21 results slightly ahead of expectations • Full year brick sales volumes 33% ahead of 2020 and 1% ahead of 2019 • Continued strength of operating cash flow drives strong liquidity position; with closing net cash before leases of £40.9
Slide 5: Strategic Highlights
STRATEGIC HIGHLIGHTS • New Desford brick factory now expected to deliver a 22% effective increase in brick production output from 2025; anticipated incremental EBITDA increased to c.£25m from c.£15m.This increase primarily driven by the reduced performance of the old factory as well as the benefit o
Slide 6: Financial Review
Keeping Britain Building FINANCIAL REVIEW
Slide 7: Key Financials
KEY FINANCIALS Year ended 31 December* 2021 2020 2021 change £m £m £m vs 2020 Revenue 370.4 291.9 27% EBITDA 70.4 37.9 86% Operating profit 54.0 20.8 160% Profit before tax 50.7 17.4 191% Earnings per share (pence) 17.5 6.6 165% Cash flow from operations 81.2 53.9 51% Net cash before leases 40.9 16.
Slide 8: Profit and Loss
PROFIT AND LOSS Year ended 31 December* 2021 2020 2021 change £m £m £m vs 2020 Revenue 370.4 291.9 27% EBITDA - Bricks and Blocks 70.5 40.3 75% - Bespoke Products (0.1) (2.4) Total 70.4 37.9 86% EBITDA margin (%) 19.0% 13.0% Depreciation and Amortisation (16.4) (17.1) (4)% Operating profit / EBIT 54
Slide 9: Comparison of Result to 2019
COMPARISON OF RESULT TO 2019 £m Unrecovered cost inflation (9.8m) Swadlincote Bonus / share Inefficiency at Property disposal 2019 EBITDA* Sales volumes Selling prices Cost inflation disposal based payments Desford 2021 EBITDA* *Before exceptional items • EBITDA before exceptional items for the year
Slide 10: Segmental Results: Bricks and Blocks
SEGMENTAL RESULTS: BRICKS AND BLOCKS Year ended 31 December* £m 2021 2020 Change Revenue 298.1 223.1 34% EBITDA before overhead allocation 90.5 54.9 65% EBITDA margin before overhead allocation 30.4% 24.6% Overhead allocation (20.0) (14.6) EBITDA 70.5 40.3 75% EBITDA margin 23.6% 18.1% *Before excep
Slide 11: Segmental Results: Bespoke Products
SEGMENTAL RESULTS: BESPOKE PRODUCTS Year ended 31 December* £m 2021 2020 Change Revenue 76.1 71.7 6% EBITDA before overhead allocation 4.8 1.2 300% EBITDA margin before overhead allocation 6.3% 1.7% Overhead allocation (4.9) (3.6) EBITDA (0.1) (2.4) EBITDA margin - - *Before exceptional items • Reve
Slide 12: Cash Flow
CASH FLOW Year ended 31 December • £81.2m of cashflow before exceptional items demonstrates the Group’s ability to £m 2021 2020 consistently generate strong cashflow Operating cash flow before exceptional items 81.2 53.9 • Full year capital spend was £34.6m including Cash payments made in respect of
Slide 13: Capex Guidance
CAPEX GUIDANCE Capex £m 2022 2023 Desford brick factory 31.0 5.0 Wilnecote refurbishment 12.0 13.0 Accrington slips 3.0 9.0 Maintenance 12.0 12.0 Total capex 58.0 39.0 • In 2022 and 2023 we expect to spend £58m and £39m respectively, inclusive of £12m of normal maintenance capex Keeping Britain Buil
Slide 14: Working Capital
WORKING CAPITAL Accrued & other payables Trade payables Trade and other receivables Inventory • Cashflow benefits from a £10m reduction in working capital in 80 year driven by increase in payables, primarily a result of cost inflation 60 33 33 • With selling prices increased in Jan 2022 and again in
Slide 15: Cash Position and Facilities
CASH POSITION AND FACILITIES Net cash £m December 2021 December 2020 Cash and cash equivalents 41.5 31.5 Loans and borrowings (0.6) (15.5) Net cash excluding leases 40.9 16.0 Lease liabilities (16.5) (9.4) Net cash 24.4 6.6 • Strong balance sheet position with net cash before leases of £40.9m • Debt
Slide 16: Our Markets
Keeping Britain Building OUR MARKETS
Slide 17: UK Housing Market
UK HOUSING MARKET Forecast housing growth 50,000 45,000 40,000 35,000 30,000 £m 25,000 20,000 15,000 10,000 5,000 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total housing (New) Total housing (RM&I) Source: Construction Products Association (CPA) Winter 2021/22 Forecast • Supported
Slide 18: UK Brick Market
UK BRICK MARKET UK brick inventory and deliveries (quarterly average) Brick industry 700 stocks have fallen 600 during the 500 pandemic Bricks (m) 400 reflecting reduced production 300 resulting from the 200 first lockdown and 100 subsequent strong 0 recovery in 2013 2014 2015 2016 2017 2018 2019 20
Slide 19: UK Brick Market Operating at Capacity
UK BRICK MARKET OPERATING AT CAPACITY • Industry capacity was rationalised during the global financial crisis with Forterra playing the leading role in this UK domestic installed brick capacity* Forterra Others (0.3) 2.6 (0.3) 0.1 0.1 0.1 (0.05) 2.3 0.05 2.1 2.0 2007E Permanently Permanently 2014E F
Slide 20: Strategic Update
Keeping Britain Building STRATEGIC UPDATE
Slide 21: A Clear and Focused Strategy
A CLEAR AND FOCUSED STRATEGY • We are well positioned to capture profitable growth, benefitting from the structural dynamics of the markets in which we operate • Our strategy for growth is focused upon organic investment across three interconnected pillars 1 STRATEGY IN ACTION STRATEGY IN ACTION STR
Slide 22: Continued Strong Cash Generation
CONTINUED STRONG CASH GENERATION Continued strong free cash flow will be allocated in line with our capital allocation priorities 1 1. Strategic organic capital investment to deliver attractive returns 2. Progressive ordinary dividend with the pay-out ratio increasing to 55% of earnings from 2021 on
Slide 23: £25m Incremental EBITDA at New Desford Facility
£25M INCREMENTAL EBITDA AT NEW DESFORD FACILITY • £95m investment adding new efficient capacity, producing core products for our housebuilding customers Returns • Project expected to generate attractive returns over the medium term positioning the Group to benefit from the favourable long-term housi
Slide 24: £27m Wilnecote Brick Factory Redevelopment
£27M WILNECOTE BRICK FACTORY REDEVELOPMENT • Expansion into the commercial and specification markets, increasing product range and improving efficiency • At an expected capital cost of c.£27m, redevelopment will allow production of a wider range of high specification products including greater numbe
Slide 25: £12m Investment in Brick Slip Manufacturing Capability
£12M INVESTMENT IN BRICK SLIP MANUFACTURING CAPABILITY • Investment at our Accrington facility to enable the manufacture of brick slips • c.£12m investment facilitating the manufacture of up to 48m slips • Investment minimised through utilisation of an existing factory with only a small reduction in
Slide 26: Pipeline of Attractive Capex Projects
PIPELINE OF ATTRACTIVE CAPEX PROJECTS Organic investment pipeline 2022 2023 2024 2025 BEYOND 2025 First year of full Run-rate full DESFORD Commissioning production reached production and full financial contribution Project First year of full Full financial WILNECOTE commenced Commissioning productio
Slide 27: £40m Buyback Programme
£40M BUYBACK PROGRAMME • On 26 January 2022 the Board announced the commencement of share buyback programme to repurchase ordinary shares of 1 pence each in the capital of the Company • The intention is to repurchase and cancel £40m worth of shares through 2022 £40M SHARE BUYBACK • Decision taken in
Slide 28: Sustainability
Keeping Britain Building SUSTAINABILITY
Slide 29: Commitment to Sustainability
COMMITMENT TO SUSTAINABILITY Operating sustainably is critical to our long-term success as a business and influences everything we do. We have set out a number of challenging new targets across three key pillars: People – we care about the health, safety and wellbeing of our people, their families an
Slide 30: Continued Progress – Solar Farm Announced
CONTINUED PROGRESS – SOLAR FARM ANNOUNCED Forterra Solar Farm • Entered into a 15-year Power Purchase Agreement (PPA) which will see us receive around 70% of our electricity from 2025 from a dedicated solar farm • c.£50m commitment to renewable energy over the period of the agreement will provide us
Slide 31: Outlook
Keeping Britain Building OUTLOOK
Slide 32: Outlook
OUTLOOK • Market conditions remain highly supportive with continued demand for new housing and constrained UK manufacturing capacity driving brick imports to record levels, despite increasing macro-economic uncertainty and supply chain pressures which have created a higher interest rate environment
Slide 33: Delivering Long-Term Shareholder Value
DELIVERING LONG-TERM SHAREHOLDER VALUE WELL-POSITONED TO DELIVER PROFITABLE GROWTH ESTABLISHED LEADING MARKET LONG-TERM STRUCTURAL DEMAND INVESTMENT PIPELINE TO DELIVER COMMITMENT TO SUSTAINABILITY STRONG PROFITABLE GROWTH, CASH POSITIONS AND SUPPLY FACTORS UNDERPINS CAPACITY GROWTH, EFFICIENCY AND
Slide 34: Appendices
Keeping Britain Building Appendices
Slide 35: Key Financials (vs. 2019)
KEY FINANCIALS (VS. 2019) Year ended 31 December* 2021 2019 2021 change £m £m £m vs 2019 Revenue 370.4 380.0 (3)% EBITDA 70.4 82.7 (15)% Operating profit 54.0 65.0 (17)% Profit before tax 50.7 62.5 (19)% Earnings per share (pence) 17.5 25.5 (31)% Cash flow from operations 81.2 64.9 25% Net (debt) /
Slide 36: Profit and Loss (vs. 2019)
PROFIT AND LOSS (VS. 2019) Year ended 31 December* 2021 2019 2021 change £m £m £m vs 2019 Revenue 370.4 380.0 (3)% EBITDA - Bricks and Blocks 70.5 80.4 (12)% - Bespoke Products (0.1) 2.3 Total 70.4 82.7 (15)% EBITDA margin (%) 19.0% 21.8% Depreciation and Amortisation (16.4) (17.7) (7)% Operating pr
Slide 37: Segmental Results: Bricks and Blocks (vs. 2019)
SEGMENTAL RESULTS: BRICKS AND BLOCKS (VS. 2019) Year ended 31 December* £m 2021 2019 Change Revenue 298.1 279.1 7% EBITDA before overhead allocation 90.5 93.0 (3)% EBITDA margin before overhead allocation 30.4% 33.3% Overhead allocation (20.0) (12.6) EBITDA 70.5 80.4 (12)% EBITDA margin 23.6% 28.8%
Slide 38: Segmental Results: Bespoke Products (vs. 2019)
SEGMENTAL RESULTS: BESPOKE PRODUCTS (VS. 2019) Year ended 31 December* £m 2021 2019 Change Revenue 76.1 103.5 (26)% EBITDA before overhead allocation 4.8 5.4 (11)% EBITDA margin before overhead allocation 6.3% 5.2% Overhead allocation (4.9) (3.1) EBITDA (0.1) 2.3 EBITDA margin - 2.2% *Before excepti
Slide 39: Working Capital (vs. 2019)
WORKING CAPITAL (VS. 2019) Accrued & other payables Trade payables Trade and other receivables Inventory 100 80 60 48 33 40 20 40 39 0 £m (29) (35) (20) (40) (37) (39) (60) (80) £22m £(2)m (100) Net working capital Dec-19 Dec-21 Keeping Britain Building 39
Slide 40: Summary Balance Sheet
SUMMARY BALANCE SHEET £m Dec 2021 Dec 2020 Intangible assets 17.7 11.0 Property, plant and equipment 201.4 187.1 Right-of-use assets 16.5 9.0 Total non-current assets 235.6 207.1 Current assets Inventories 32.8 33.0 Trade and other receivables 39.1 35.7 Cash and cash equivalents 41.5 31.5 Income tax
Slide 41: Forterra contact details
Forterra 5 Grange Park Court Roman Way Northampton NN4 5EA 01604 707600 41