Forterra Plc · LSE:FORT
Forterra — H1 2023 Earnings Presentation
29 slides from Forterra's earnings presentation, Jul 27, 2023
Slide 1: 2023 Interim Results, 27 July 2023
(eM RESULTS lie 27 JULY 2023
Slide 2: Disclaimer
This document has been prepared by Forterra plc (the “Company”) solely for use at a Statements in the Presentation, including those regarding the future financial condition, results presentation on 27 July 2023 in connection with the Company’s Results Announcement in of operations, business or other
Slide 3: Agenda
Highlights Financial Review Our Markets Strategic Update Chief Executive Officer Chief Financial Officer Outlook Investment Case 2023 Interim Results Presentation 3
Slide 4: Highlights
• Resilient H1 result broadly in line with • Group revenues of £183.2m, a decrease of • Whilst market conditions remain competitive, management expectations delivered against a 17.8% vs. prior year our selling prices have remained firm and our backdrop of challenging trading conditions cost base sta
Slide 5: Financial Review
2023 Interim Results Presentation 5
Slide 6: Financial summary
Six months ended 30 June* £m 2023 2022 Change Revenue 183.2 222.8 (17.8)% EBITDA 31.1 46.1 (32.5)% EBITDA margin 17.0% 20.7% (370) bps Operating profit (EBIT) 21.7 38.1 (43.0)% Profit before tax 19.2 37.3 (48.5)% Earnings per share (pence) 7.1 13.5 (47.4)% Cash flow from operations (16.3) 37.5 n/a N
Slide 7: Income statement
Period ended 30 June* £m 2023 2022 Change Revenue 183.2 222.8 (17.8)% EBITDA - Bricks and Blocks 27.8 44.3 (37.2)% - Bespoke Products 3.3 1.8 83.3% Total 31.1 46.1 (32.5)% EBITDA margin 17.0% 20.7% Depreciation and amortisation (9.4) (8.0) 17.5% Operating profit (EBIT) 21.7 38.1 (43.0)% Finance expe
Slide 8: Bricks and Blocks
• Revenues of £143.3m, 20.8% below 2022 Six months ended 30 June* • Industry domestic brick despatches fell by 32% £m 2023 2022 Change relative to prior year in the five months to May 2023. Our own despatches down further due to customer Revenue 143.3 181.0 (20.8)% mix and exposure to volume house b
Slide 9: Bespoke Products
• Excellent performance by the segment delivering a result ahead of last year Six months ended 30 June* £m 2023 2022 Change • Revenue of £41.9m only 5.4% behind prior period with pricing gains largely offsetting volume declines Revenue 41.9 44.3 (5.4)% EBITDA before overhead allocations 5.6 4.9 14.3
Slide 10: Actions to manage inventory and cost base
• Decisive action to limit further inventory growth and manage cost base • Mothballing of our 50m brick per annum brick factory at Howley Park near Leeds with other production reductions elsewhere will reduce output by c.75m bricks per year saving c.£10m of fixed costs • Restructuring of commercial
Slide 11: Working capital and inventory
• Working capital increase predominantly driven by £30m inventory build • Other working capital movements driven by seasonality • Industry brick inventory has increased to 454m bricks as at May 2023 in line with longer-term norms and equivalent to 3 months sales at normal levels of demand • Discipli
Slide 12: Cash flow
Six months ended 30 June • Cash used in operations before exceptional items £m 2023 2022 was £16.3m in the first half (2022: cash EBITDA 31.1 46.1 generated of £37.5m) Change in inventories (29.6) (3.5) Change in trade and other receivables (16.8) (22.4) • New lease liabilities primarily relate to n
Slide 13: Capex expectations
Capex expectations 2023 Total Project £m <2023 H1 H2 Total 2024 total Desford 86.1 3.7 3.2 6.9 2.0 95.0 Wilnecote redevelopment 7.0 5.4 10.9 16.3 6.7 30.0 Accrington brick slip facility - 0.1 4.9 5.0 7.0 12.0 Maintenance 6.1 7.9 14.0 14.0 Total capex 15.3 26.9 42.2 29.7 2023 Interim Results Presenta
Slide 14: Net debt and credit facility
• Closing net debt (excluding lease liabilities) was £50.1m (31 December 2022: £5.9m) As at • £170m credit facility recently extended to January 30 June 31 December £m Change 2023 2022 2027 with a further 18-month option thereafter Cash and cash equivalents 16.7 34.3 (51.3)% • Borrowings at 30 June
Slide 15: Strategic Update
2023 Interim Results Presentation 15
Slide 16: CEO introduction
I joined Forterra in the belief that it was a great business with a bright future. This sentiment has been confirmed in the three months since I became Chief Executive Officer. • Talented people, passionate about what they do • Great business, aligned with my expectations, with opportunities to impr
Slide 17: New build housing completions
New build housing completions 400,000 • New build housing market in the UK has 350,000 always been cyclical 300,000 • The latest CPA summer forecast published 250,000 this week forecasts a 23% fall in housing Completions starts in 2023 a reduction of 4% since its 200,000 previous forecast 150,000 •
Slide 18: Evolving domestic brick market capacity
Evolving domestic brick market capacity Forterra Others 2022 demand • Industry capacity was rationalised during the global financial crisis with Forterra playing the leading role • Despite current and announced capacity investments, under normal market conditions the UK brick industry still lacks th
Slide 19: Monthly brick despatches and imports
Monthly brick despatches vs. prior year 200.0 35% 34% 150.0 33% Bricks (m) 32% • Industry domestic brick despatches were 100.0 31% 32% down on the prior year in the five 30% 50.0 29% months to May 2023, with the month of May 28% showing signs of an improving trend, further - 27% evidenced by our own
Slide 20: Our Markets
2023 Interim Results Presentation 20
Slide 21: Strategic investment projects
• Market leading efficiency once ongoing • Commissioning H1 2024 • Commissioning H1 2024 commissioning is complete • £30m investment • £12m investment • Successful opening held in May 2023 • Improved efficiency • Up to 48m slips per annum • £95m investment • Increased breadth of product range • Cost
Slide 22: Capital allocation priorities
of organic investment over next decade Continued strong free cash flow will be allocated in line with our capital allocation priorities 1. Strategic organic capital investment to deliver compelling returns 2. Attractive dividend policy 2023 interim with a pay-out ratio of 55% dividend of earnings 3.
Slide 23: Sustainability progress
• We are now only nine months from benefiting from our ground-breaking commitment to solar power by way of the Power Purchase Agreement that will provide c.70% of our electricity through a dedicated solar farm from 2024 • Successfully completed the first firing of bricks partially fuelled by hydroge
Slide 24: Outlook
2023 Interim Results Presentation 24
Slide 25: Outlook
• Outlook remains uncertain given the macroeconomic headwinds of high inflation and rising interest rates that are likely to continue weighing on demand for new housing and therefore our products • Whilst we do presently see tentative signs of improving trading, only a modest improvement in demand i
Slide 26: Investment case
Established leading market Long-term structural demand Investment pipeline to deliver Commitment to sustainability Strong profitable growth, cash positions in core products and supply factors underpins capacity growth, efficiency and leadership generation and disciplined market growth decarbonisatio
Slide 27: Appendix
2023 Interim Results Presentation 27
Slide 28: Balance sheet
As at £m 30 June 2023 31 December 2022 Intangible assets 18.2 23.6 Property, plant and equipment 245.1 233.7 Right-of-use assets 21.4 18.1 Total non-current assets 284.7 275.4 Current assets Inventories 72.6 43.0 Trade and other receivables 61.1 44.3 Cash and cash equivalents 16.7 34.3 Other assets
Slide 29: Forterra plc contact details
Forterra plc 5 Grange Park Court, Roman Way, Northampton NN4 5EA www.forterra.co.uk 2023 Interim Results Presentation