Forterra Plc · LSE:FORT
Forterra — H1 2021 Earnings Presentation
39 slides from Forterra's earnings presentation, Jul 29, 2021
Slide 1: Forterra plc Results Presentation, Period Ended 30 June 2021
FORTERRA PLC RESULTS PRESENTATION PERIOD ENDED 30 JUNE 2021 29 JULY 2021 Keeping Britain Building
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 30 June 2021 (the “Presentation”). For the purposes of this notice, “Presentation” shall mean and
Slide 3: Agenda
AGENDA 1. Key points 2. Financial review 3. Current trading 4. Outlook 5. Strategic update 6. Q&A Stephen Harrison Ben Guyatt Chief Executive Officer Chief Financial Officer Keeping Britain Building 3
Slide 4: Operational and Trading Highlights
OPERATIONAL AND TRADING HIGHLIGHTS • Strong recovery in first half trading vs. 2020, underpinned by robust demand from both the new build and the repair maintenance and improvement (RM&I) markets • Revenues in Bricks and Blocks segment slightly ahead of 2019 levels • Strong EBITDA recovery in Bricks
Slide 5: Financial Review
Keeping Britain Building FINANCIAL REVIEW
Slide 6: Key Financials
KEY FINANCIALS Six months ended 30 June 2021 2019 2021 change £m £m £m vs 2019 Revenue 180.3 193.6 (6.9%) EBITDA 37.0 42.5 (12.9%) Operating profit 29.0 33.9 (14.5%) Profit before tax 27.1 32.7 (17.1%) Earnings per share (pence) 9.3 13.6 (31.6%) Cash flow from operations 31.6 27.6 14.5% Net funds /
Slide 7: Profit and Loss
PROFIT AND LOSS Six months ended 30 June 2021 2019 2021 change £m £m £m vs 2019 Revenue 180.3 193.6 (6.9%) EBITDA - Bricks and Blocks 37.8 41.6 (9.1%) - Bespoke Products (0.8) 0.9 n/a Total 37.0 42.5 (12.9%) EBITDA margin (%) 20.5% 22.0% (150 bps) Depreciation and Amortisation (8.0) (8.6) Operating
Slide 8: Segmental Results: Bricks and Blocks
SEGMENTAL RESULTS: BRICKS AND BLOCKS Six months ended 30 June £m 2021 2019 Change Revenue 145.0 143.9 0.8% EBITDA 37.8 41.6 (9.1%) EBITDA margin 26.1% 28.9% (280 bps) Note: 2021 shown vs. 2019 for meaningful comparison. 2021 vs 2020 is shown additionally within the appendix • Revenue increased by 0.
Slide 9: Segmental Results: Bespoke Products
SEGMENTAL RESULTS: BESPOKE PRODUCTS Six months ended 30 June £m 2021 2019 Change Revenue 37.2 50.9 (26.9%) EBITDA (0.8) 0.9 n/a EBITDA margin (2.2%) 1.8% Note: 2021 shown vs. 2019 for meaningful comparison. 2021 vs 2020 is shown additionally within the appendix • Revenues fell by £13.7m relative to
Slide 10: Cash Flow
CASH FLOW Six months ended 30 June • Strong operating cash flow generation ahead of 2019 £m 2021 2020 2019 • Full year capital spend guided at approximately £48m Cash flow from operations 31.6 (4.2) 27.6 • Desford spend: Cash payments made in respect of exceptional items - (0.6) - To date: £41.5m In
Slide 11: Working Capital
WORKING CAPITAL 120 Accrued & other payables Trade payables • Strong market demand has prevented replenishment of 100 Trade and other receivables Inventory inventories 80 • Seasonal increase in receivables as expected mitigated by 42 35 48 corresponding increase in payables 60 44 33 Trade working ca
Slide 12: Net Debt and Facilities
NET DEBT AND FACILITIES Net funds / (debt) £m June 2021 December 2020 December 2019 Cash and cash equivalents 31.8 31.5 26.6 Loans and borrowings (5.5) (15.5) (69.8) Net debt excluding leases 26.3 16.0 (43.2) Lease liabilities (15.0) (9.4) (14.1) Net funds / (debt) 11.3 6.6 (57.3) • Strong balance s
Slide 13: Current Trading
Keeping Britain Building CURRENT TRADING
Slide 14: Recent Customer Sentiment
RECENT CUSTOMER SENTIMENT Sentiment from our customers remains positive “Customer demand for our new homes has been strong right across the UK “The high levels of growth with healthy sales experienced in March have reservation rates through continued throughout the the period. The Group has “The tra
Slide 15: UK Housing Market
UK HOUSING MARKET Forecast housing growth 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total housing (New) Total housing (RM&I) Source: Construction Products Association (CPA) Summer 2021 Forecast • Supported by core fundamenta
Slide 16: Long Term Housing Market Fundamentals Remain Supportive
LONG TERM HOUSING MARKET FUNDAMENTALS REMAIN SUPPORTIVE Short-term Long-term New housing completions vs. Government target Supportive Government policy 300,000 - Help to Buy in place to 2023 250,000 - Government backed 95% mortgage scheme 200,000 - Increase in PRS and mixed tenure housing 150,000 Su
Slide 17: UK Brick Market
UK BRICK MARKET UK brick market (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, 100 followed by strong 0 recovery in 2013 2014 2015 2016 2017 2018 2019 2020 2021 demand Sourc
Slide 18: Sustainability – Our Future Targets
SUSTAINABILITY – OUR FUTURE TARGETS Target Target Target Pillar Topic Target Pillar Topic Target Pillar Topic Target Year Year Year 32% reduction 10% Group 2025 Group CO2 2030 Health and safety – New product index vs. 2019 Lost time incident Zero harm n/a revenue emissions / tonne baseline frequency
Slide 19: Sustainability – Continued Progress in 2021
SUSTAINABILITY – CONTINUED PROGRESS IN 2021 • Continue to work towards our target of a 32% reduction in our emissions over the next decade • Signed up to Race to Zero campaign • Hydrogen trials planned for H2, a key step in proving this breakthrough technology • Trialling the use of HVO in both mobi
Slide 20: Outlook
Keeping Britain Building OUTLOOK
Slide 21: Outlook
OUTLOOK • Current favourable market outlook and trading conditions expected to continue in H2 • Order books remain strong supported by robust customer sentiment • The Board remains positive about the fundamentals relating to the UK housing market driven by structural undersupply and supportive Gover
Slide 22: Strategy and Capital Allocation
Keeping Britain Building STRATEGY AND CAPITAL ALLOCATION
Slide 23: Strategy Review and Capital Allocation
STRATEGY REVIEW AND CAPITAL ALLOCATION • Focus on organic capital investment and increased returns to shareholders • New Desford brick factory construction project progressing to timetable and budget with commissioning expected in late 2022 • £27m investment in Wilnecote brick factory in Staffordshi
Slide 24: Use of Capital Over Next Decade
USE OF CAPITAL OVER NEXT DECADE Over the next decade we expect the Group to generate significant free cash flow that will be allocated in line with our capital allocation priorities: 1 Organic We anticipate deploying over £200m of capital on a pipeline of attractive organic investment projects Inves
Slide 25: Investment in R&D
INVESTMENT IN R&D • In addition to these capital allocation priorities, we will also increase our investment into research & product development, focusing on: • technologies to support the reduction of carbon emissions across the Group; along with • enhancing our product range, especially offsite fa
Slide 26: New Desford Facility on Track
NEW DESFORD FACILITY ON TRACK Summary • Project expected to generate attractive returns over the medium term positioning the Group to benefit from the favourable long-term housing market fundamentals • £20m expected annual EBITDA (£15m incremental) Progress update • £41.5m spent to date (June) • New
Slide 27: Wilnecote Brick Factory Redevelopment
WILNECOTE BRICK FACTORY REDEVELOPMENT Increased capacity and enhanced range • Forterra’s Wilnecote factory was opened in 1991, and currently produces a broad range of bricks used across both the residential and commercial & specification markets • Redevelopment of the factory, at an expected capital
Slide 28: Wilnecote Brick Factory Redevelopment
WILNECOTE BRICK FACTORY REDEVELOPMENT Attractive market Project timeline • The commercial & specification market supplies bricks into a • Ultimately the project is expected to deliver incremental EBITDA of range of larger projects including residential, commercial, schools approximately £7m and hosp
Slide 29: Dividend Policy
DIVIDEND POLICY • Dividend pay-out ratio increased in 2021 to 55% of earnings up from the previous 45% • Increased dividend allows shareholders to benefit from the current and future cash generation of the business without compromising our ability to deploy capital within the business to deliver lon
Slide 30: Strategic Investment Summary
STRATEGIC INVESTMENT SUMMARY In order to support this strategy, the Board has set capital allocation priorities as follows: 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 onwards 3.
Slide 31: Closing Summary
CLOSING SUMMARY • Strong recovery in first half trading vs 2020, underpinned by robust demand from both the new build and the repair maintenance and improvement (RM&I) markets • Over the next decade we expect the Group to generate significant free cashflow and we envisage that this will be allocated
Slide 32: Q&A
Keeping Britain Building Q&A
Slide 33: Appendices
Keeping Britain Building Appendices
Slide 34: Key Financials
KEY FINANCIALS Six months ended 30 June 2021 2020 2019 2021 change 2021 change £m £m £m £m vs 2020 vs 2019 Revenue 180.3 122.4 193.6 47.3% (6.9%) EBITDA 37.0 8.2 42.5 351.2% (12.9%) Operating profit / (loss) 29.0 (0.8) 33.9 n/a (14.5%) Profit / (loss) before tax 27.1 (2.3) 32.7 n/a (17.1%) Earnings
Slide 35: Profit and Loss
PROFIT AND LOSS Six months ended 30 June 2021 2020 2019 2021 change 2021 change £m £m £m £m vs 2020 vs 2019 Revenue 180.3 122.4 193.6 47.3% (6.9%) EBITDA - Bricks and Blocks 37.8 11.1 41.6 240.5% (9.1%) - Bespoke Products (0.8) (2.9) 0.9 (72.4%) n/a Total 37.0 8.2 42.5 351.2% (12.9%) EBITDA margin (
Slide 36: Segmental Results: Bricks and Blocks
SEGMENTAL RESULTS: BRICKS AND BLOCKS Six months ended 30 June Change vs. Change vs. £m 2021 2020 2019 HY20 HY19 Revenue 145.0 90.5 143.9 60.2% 0.8% EBITDA 37.8 11.1 41.6 240.5% (9.1%) EBITDA margin (%) 26.1% 12.3% 28.9% 1380 bps (280 bps) Keeping Britain Building 36
Slide 37: Segmental Results: Bespoke Products
SEGMENTAL RESULTS: BESPOKE PRODUCTS Six months ended 30 June Change vs. Change vs. £m 2021 2020 2019 HY20 HY19 Revenue 37.2 33.0 50.9 12.7% (26.9%) EBITDA (0.8) (2.9) 0.9 (72.4%) n/a EBITDA margin (%) (2.2%) (8.8%) 1.8% Keeping Britain Building 37
Slide 38: Summary Balance Sheet
SUMMARY BALANCE SHEET £m Jun 2021 Dec 2020 Intangible assets 11.3 11.0 Property, plant and equipment 193.9 187.1 Right-of-use assets 14.9 9.0 Total non-current assets 220.1 207.1 Current assets Inventories 35.0 33.0 Trade and other receivables 55.0 35.7 Cash and cash equivalents 31.8 31.5 Income tax
Slide 39: Forterra contact details
Forterra 5 Grange Park Court Roman Way Northampton NN4 5EA 01604 707600