AGM Trading Update
20 May 2019
Forterra plc
AGM Trading Update
Forterra plc, a leading UK producer of manufactured masonry products, provides this trading update for the four months ended 30 April 2019, ahead of its Annual General Meeting to be held later today.
Trading update
Trading during the period has been in line with management's expectations, underpinned by continuing positive levels of activity in the new build housing market, with brick sales volumes modestly ahead of last year. Precast concrete floor beam volumes in the period have been good, providing an encouraging forward indicator for housebuilding activity. As reported previously, price increases for the year have been agreed with most major customers to offset the increase in the cost base. Group revenue for the four months was 7.8% ahead of the same period in 2018, reflecting the positive start to 2019 and also the weather-affected weaker comparative. The Group continues to generate good levels of operating cashflow, despite an expected increase in working capital due to the spring selling season.
The productivity improvements seen in Bison Precast in the last quarter of 2018 have been sustained during the year to date, and the business has achieved contract wins supporting future sales volumes in hollowcore, beam and bespoke precast products.
Whilst we remain watchful of the impact of the current uncertainty on our end markets, based on the good start to the year as well as indications of demand from major customers, the Board's expectations for the full year remain unchanged.
Brick capacity expansion
The Group has now received planning consent (subject to legal agreement) for the £95m project to build a new brick facility at our existing site at Desford, Leicestershire, which we view as a significant positive development.
This major investment will lead to the construction of the largest and most efficient brick factory in Europe capable of producing up to 180 million bricks per annum. The existing plant, which has a capacity of 85 million bricks pa, will remain operational until the new facility constructed alongside is completed. It is anticipated that the new plant will commence full production during 2022 after a period of commissioning.
Contracts for the building work and equipment supply and installation are being finalised, and the project team mobilised in order to drive delivery of the project under the direction of the Group Executive and Board.
Dividend payout
In the Group's full year 2018 results statement, the Board confirmed its priorities for allocating capital as organic investment, dividends and appropriate acquisitions. It stated that it would continue following a progressive dividend policy reflecting the long-term earnings and cash flow potential of the Group whilst recognising that the business operates in cyclical markets.
As detailed above, once the major investment at Desford is completed, this will lead to a significant increase in earnings over the cycle based on the additional volume and the reduced cash cost of production for the plant compared with the existing facility. In view of this, the Board has decided to increase the dividend payout to 45% of earnings for 2019 and to maintain the progressive policy thereafter. This increase reflects the Board's confidence in the position of the Group and its future potential.
Board changes
As announced in September 2018, Paul Lester steps down as Chairman and Director of the Company with effect from the conclusion of the AGM today and will be succeeded by Justin Atkinson. The Board is also pleased to confirm that Katherine Innes Ker will become Senior Independent Non-Executive Director and Vince Niblett will take on the role of Chairman of the Audit Committee.
The Board would like to thank Paul for his immense contribution to Forterra and pay tribute to his leadership of the Group through the listing on the London Stock Exchange in April 2016 and its subsequent period of strong performance as a public company.
Enquiries
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Forterra plc: |
+44 (0) 1604 707 600 |
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Stephen Harrison (CEO) |
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Shatish Dasani (CFO) |
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FTI Consulting: |
+44 (0) 20 3727 1340 |
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Richard Mountain |
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Nick Hasell |
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This announcement contains inside information and is disclosed in accordance with the Company's obligations under the Market Abuse Regulation (EU) No 596/2014
Further information relating to the Company and its group can be found at www.forterraplc.co.uk
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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