22 May 2018
Forterra plc
AGM Trading update & Brick Capacity Expansion
Forterra plc, a leading UK producer of manufactured masonry products, provides this trading update for the four months ended 30 April 2018, ahead of its Annual General Meeting to be held later today.
Trading update
In common with the rest of the sector, trading in the period was affected by the severe weather. This led to lost production and delays in construction activity which impacted demand for our products, particularly during March. In recent weeks we have seen activity levels resume and whilst there may be some lag from certain product sectors, we anticipate that overall the shortfall will be made up through the rest of the year. As reported previously, price increases for the year have been agreed with most customers in order to cover the increase in the cost base. Group revenue for the four months was 12% ahead of the prior year, including the benefit of the Bison business acquired in September 2017.
The Group continues to generate good levels of operating cashflow, with an expected increase in trade receivables during the spring selling season. Net debt at the end of April was £72.6m compared with £60.8m at the start of the year.
The outlook for the Group remains positive and the Board's expectations for the full year remain unchanged.
Brick capacity expansion
Having completed the evaluation of options for increasing brick capacity, the Board is pleased to announce that a planning application for redeveloping the site at Desford in Leicestershire is being finalised. The facility currently has an annual production capacity of 85m bricks, and the expansion project will lead to a new factory capable of producing up to 180m bricks per annum in total at an expected capital cost of £90-95m. The existing plant will remain operational until the new facility built alongside is completed. Subject to planning consent being received, it is anticipated that the new plant will be commissioned in late 2021 and that the capital expenditure will be spent over the period 2019 to 2022. Enabling and preparation costs of £1.5m relating to the project have already been committed and included in the capital budget for the current year. The expenditure will be funded from the free cash flow generated by the business as well as the Group's existing debt facility.
The Desford expansion project is anticipated to deliver an internal rate of return (IRR) over 20 years in excess of 15% after tax.
Stephen Harrison, Chief Executive Officer, commenting on the proposed investment said:
"The high level of capacity utilisation in the UK brick industry, together with the attractive long term fundamentals on housebuilding supported by government policies, provides a sound basis for this major investment.
"We have chosen redevelopment of the Desford site as the favoured option of those considered as it enables us to replace the existing plant with a larger modern facility, providing both additional capacity and the benefit of a lower production cost. This will give us the flexibility to continue to serve our customers and meet their requirements as the market grows.
"The project is a key part of our strategy to grow our core business and pursue manufacturing excellence, driven by our strong customer relationships as well as our people. It will enable us to continue delivering sustainable shareholder value."
Enquiries
Forterra plc: |
+44 (0) 1604 707 600 |
Stephen Harrison (CEO) |
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Shatish Dasani (CFO) |
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FTI Consulting: |
+44 (0) 20 3727 1340 |
Richard Mountain |
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Nick Hasell |
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Further information relating to the Company and its group can be found at www.forterraplc.co.uk
A conference call to discuss the brick capacity expansion will be held today at 8am for analysts and investors. The accompanying presentation is available at www.forterraplc.co.uk
Conference call details:
UK Toll-Free: 0800 3589473
PIN: 85049776#
UK Toll: +44 3333 000804
PIN: 85049776#
