Forterra Plc · LSE:FORT
Forterra — H1 2024 Earnings Presentation
34 slides from Forterra's earnings presentation, Jul 30, 2024
Slide 1: Forterra plc, 30 July 2024
30 JULY 2024 FORTERRAPLC
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 30 July 2024 in connection with the Company’s Results Announcement in of operations, business or other
Slide 3: Agenda
01 ⎯ Headlines 02 ⎯ Financial Review 03 ⎯ Our Markets 04 ⎯ Strategic Update 05 ⎯ Sustainability 06 ⎯ Outlook Chief Executive Officer Chief Financial Officer Interim Results Presentation 2024 3
Slide 4: Headlines
⎯ Group revenues for the period of £162.1m, represents a decrease of 11.5% relative to the prior year (2023: £183.2m) ⎯ H1 UK brick industry despatches estimated to have fallen approximately 9% relative to the prior period, with our own brick despatches in line with this ⎯ Despite the weaker than ex
Slide 5: Interim Results Presentation 2024
Interim Results Presentation 2024 5
Slide 6: Group financial summary, period ended 30 June
Period ended 30 June* £m 2024 2023 Change Revenue 162.1 183.2 (11.5)% EBITDA 24.3 31.1 (21.9)% EBITDA margin 15.0% 17.0% (200) bps Operating profit (EBIT) 14.0 21.7 (35.5)% Profit before tax (PBT) 9.1 19.2 (52.6)% Earnings per share (pence) 3.2 7.1 (54.9)% Operating cash flow 13.3 (16.3) n/a Net deb
Slide 7: Income statement summary
Period ended 30 June* £m 2024 2023 Change Revenue 162.1 183.2 (11.5)% EBITDA - Bricks and Blocks 22.7 28.0 (18.9)% - Bespoke Products 1.6 3.1 (48.4)% Total 24.3 31.1 (21.9)% EBITDA margin 15.0% 17.0% (200) bps Depreciation and amortisation (10.3) (9.4) 9.6% Operating profit (EBIT) 14.0 21.7 (35.5)%
Slide 8: Adjusted results and adjusted items
277.4 376.1 2023 2022 Period ended 30 June • Adjusted results are provided to fairly show our £m 2024 2023 underlying trading performance on a like for like basis EBITDA 28.0 30.0 • Adjustments relate to: Adjusted items Restructuring costs 0.2 2.1 • Restructuring costs associated with management act
Slide 9: Bricks and Blocks segment
• Revenue in the period decreased by 11.1% with brick Period ended 30 June* industry demand estimated to have fallen approximately 9% relative to the prior year £m 2024 2023** Change • Slightly stronger year on year performance in both aircrete and aggregate blocks Revenue 130.2 146.5 (11.1)% EBITDA
Slide 10: Bespoke Products segment
277.4 376.1 2023 2022 • Market conditions in line with the wider business Period ended 30 June* • Revenues in the period totalled £33.7m, a decrease of £m 2024 2023** Change £5.0m or 12.9% relative to 2023 Revenue 33.7 38.7 (12.9)% • Pricing remains broadly stable EBITDA before overhead allocations
Slide 11: Operating cash flow improvement
Increase Decrease Strong improvement in adjusted operating cashflow performance with an inflow of £13.3m compared to an outflow of £16.3m in the prior period Successfully aligning production to despatches leaves inventory stable eliminating large build seen in 2023 Interim Results Presentation 2024
Slide 12: Disciplined working capital management
• Disciplined working capital management contributes to better than expected half year balance sheet position • Total increase in working capital of £9m since year end • Seasonality traditionally leads to higher level of working capital at the mid-year although a one- off timing benefit in payables
Slide 13: Capex expectation
Capex expectation Previous £m (2019 - 2023) H1 2024 H2 2024 2024 2025 Desford 91.0 0.1 2.8 2.9 2.0 Wilnecote redevelopment 17.9 4.4 5.3 9.7 3.0 Accrington brick slip facility 3.1 3.6 3.2 6.8 - Maintenance 1.4 4.1 5.5 8.0 Total capex 112.0 9.5 15.4 24.9 13.0 • 2024 capex now expected to be c.£25m wit
Slide 14: Cash flow
• Decline in operating cashflow due predominantly Period ended 30 June • Adjusted operating cash generated from operations to a £31.1m decline in adjusted EBITDA and a was £13.3m (2023: outflow of £16.3m) £m significant working capital outflow driven by an 2024 2023 demonstrating disciplined working
Slide 15: Net debt before leases below expectations
• Net debt before leases significantly below our At 30 At 31 expectations at the half year driven by disciplined June December working capital management along with timing of capex and other payments £m 2024 2023 Change • Closing net debt (excluding lease liabilities) was Cash and cash equivalents 1
Slide 16: Interim Results Presentation 2024
Interim Results Presentation 2024 16
Slide 17: Housing starts vs. Government target
Housing starts vs. Government target 350,000 300,000 250,000 200,000 Starts 150,000 100,000 50,000 • TBC • TBC 0 2001 2002 Source: CPA Forecast Summer 2024 2003 [WIP] 2004 2005 2006 2007 2008 2009 2010 2011 Starts 2012 2013 2014 2015 Government target* 2016 2017 2018 2019 2020 2021 2022 2023 2024F 2
Slide 18: UK brick industry capacity shortfall
Evolving domestic brick industry capacity Forterra capacity Increase Forterra Demand (2022) Demand (estimate at 300,000 Decrease Others homes Government target) Source: Forterra estimates Source: Forterra management Industry capacity was rationalised during the global financial crisis with Forterra
Slide 19: Labour Government housing policies
The newly elected Labour Government have set out a number of policies with the aim of addressing the chronic shortage of housing in the UK: ▪ Building 1.5 million new homes over the current parliament, 2024-2029 ▪ Reform of planning system to make it easier to build houses on less desirable parts of
Slide 20: Interim Results Presentation 2024
Interim Results Presentation 2024 20
Slide 21: Our strategy supports delivery of our purpose
Our strategy supports the delivery of our purpose, recognising the key role our products play in shaping the built environment Make our current business even better than Provide the products and solutions for the Create an engaged, healthy and safe Leave the lightest touch on the world we it is toda
Slide 22: Organic investment in new capacity
Organic investment: Investing in new capacity to deliver growth in sales volumes along with enhanced efficiency Additional 23% capacity from the two projects 25% reduction in carbon emissions per brick vs. predecessor factories Interim Results Presentation 2024 22
Slide 23: Commercial and Manufacturing Excellence
Commercial Excellence: Optimising our performance through new Manufacturing Excellence: Aiming to realise material efficiencies across product development, digital and service innovation and optimisation of our manufacturing and distribution cost base, enhanced by innovation in our route-to-market m
Slide 24: Brick slips growth opportunity
▪ Brick slips are currently a £100m, fast growing market ▪ We continue to make good progress with our new brick slips manufacturing line in Accrington – a cost-effective entrance into this attractive market, with commissioning expected to begin in end Q3 2024 ▪ The first UK manufactured extruded sli
Slide 25: Interim Results Presentation 2024
Interim Results Presentation 2024 25
Slide 26: Sustainability update
• Current market conditions, temporary reductions in output and loss of efficiency decrease the visibility of sustainability gains in published figures • Organic investments at Desford and Wilnecote will deliver meaningful sustainability benefits with a reduction in embodied carbon of around 25% per
Slide 27: Interim Results Presentation 2024
Interim Results Presentation 2024 27
Slide 28: Outlook
• With softer comparatives, the expected 9% reduction in UK brick despatches seen in H1 is expected to reduce in H2; although overall, full year 2024 demand is expected to be lower than 2023 • With H1 despatches generally below our previous expectations, we have acted decisively to adjust our produc
Slide 29: Cyclical market recovery
• Cyclical market means recovery near certain although timing and trajectory are less definitive • Government target of 1.5 million new homes during the current parliament • The supply and demand characteristics of the UK brick market dictated that, in 2022 with only 208,000 new home completions, th
Slide 30: Growth illustration to c.£120m EBITDA
▪ 2024 guidance impacted significantly by weak market demand ▪ Strategic capital investments well progressed and ready to leverage the return to a normalised market Further growth - Brick slips - Commercial excellence potential ▪ Growth illustration assumes: - Manufacturing excellence ▪ Return to 20
Slide 31: Interim Results Presentation 2024
Interim Results Presentation 2024 31
Slide 32: Interim Results Presentation 2024
Interim Results Presentation 2024 32
Slide 33: Balance sheet
At June At December £m 2024 2023 Change Intangible assets 12.2 19.2 (7.0) Property, plant and equipment 252.5 249.7 2.8 Right-of-use assets 22.4 24.1 (1.7) Derivative asset 3.7 5.0 (1.3) Total non-current assets 290.8 298.0 (7.2) Current assets Inventories 97.1 95.8 1.3 Trade and other receivables 5
Slide 34: Forterra plc contact details
Forterra plc 5 Grange Park Court, Roman Way, Northampton NN4 5EA Tel: 01604 707600