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21 Jan 2021 | 07:36

Ibstock finishes year ahead of expectations

(Sharecast News) - Ibstock said on Thursday that it saw a continuation of improving market trends during the fourth quarter of 2020, with "encouraging" activity levels seen across its key end-market segments. The FTSE 250 brickmaker said it traded well in the period, with both solid clay brick and concrete sales volumes modestly ahead of prior year levels.

Activity in the final quarter benefitted from better-than-expected demand in both new build housing and the repairs, maintenance and improvement (RMI) markets through the firm's builders' merchant customers, particularly in the latter part of the period.

The "strong recovery" in market conditions through the second half enabled the group to achieve revenues of around £315m for the full year, down 23% on 2019, with second half performance down by about 10% year on year.

Ibstock said the remaining cost and capacity actions from the restructuring programme outlined in the second quarter, which were due to be delivered by the end of 2020, were successfully implemented during the final three months of the year.

Together with the improved volume levels achieved during the final quarter, that resulted in EBITDA margins for the final months of the year in both divisions back close to the underlying levels achieved in the prior year periods.

As a result of the strong trading performance in the fourth quarter, together with the positive impact of the cost actions taken in the year, Ibstock said it now expected to report adjusted EBITDA for 2020 "modestly above" the previous guidance of £50m, which it gave in its trading update on 28 October.

Cash flow performance for the year was "materially ahead" of expectations, with closing net debt standing at approximately £70m, compared to £85m as at 31 December 2019, and £103m on 30 June.

Ibstock said cash flow performance benefited from both the improved trading conditions through the second half, and the actions taken to manage cost and working capital throughout the period.

The group said it settled all amounts previously deferred under the HMRC Covid-19 deferred payment arrangements within 2020, representing the acceleration of about £7m, which had previously been expected to be paid in the first quarter of 2021.

During the final quarter of the year, the group also concluded an extension to its £215m revolving credit facility by a period of 12 months, to March 2023.

Looking ahead, the company said it was "encouraged" by recent market trends in the industry and the resilience of demand from its house builder and merchant customers.

The board said that, while it remained mindful of ongoing uncertainties, including those related to the future impact of Covid-19 and the expected changes in the Help-to-Buy and stamp duty rules, the momentum achieved through the end of 2020 provided it with a "strong platform for progress" in the current year.

Overall, market fundamentals for the group's products remained robust, with a structural deficit of housing, low interest rates, and government policy which was supportive of the role the construction sector would play in the UK economic recovery.

The group said it had a strong balance sheet, with the action taken in 2020 to reduce costs and increase flexibility leaving the firm "well-positioned" to take advantage of both continued improvement in its markets and future growth opportunities.

"Having taken steps to protect and reshape our business, the group traded ahead of our expectations in the latter part of the year," said chief executive officer Joe Hudson.

"While we are mindful of the ongoing uncertainties relating to Covid-19, we are encouraged by the continuing recovery of our markets through the end of 2020 and enter the new year in a strong position to capitalise on the opportunities in front of us."

At 0827 GMT, shares in Ibstock were 4.57% higher at 205.8p.
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