TIDMFORT
RNS Number : 6204H
Forterra plc
14 March 2018
14 March 2018
FORTERRA PLC
2017 FULL YEAR RESULTS
STRONG PROFIT & CASH PERFORMANCE IN FIRST FULL YEAR AS A
PUBLIC COMPANY
Forterra plc, a leading UK producer of manufactured masonry
products, announces its results for the year ended 31 December
2017.
2017 2016 Change
GBPm GBPm
----------------------------------------- ------ ------ -------
Pro-forma basis*
Revenue 331.0 294.5 12.4%
EBITDA before exceptionals 75.4 69.4 8.6%
Operating profit before exceptionals 64.5 59.0 9.3%
PBT before exceptionals 61.1 53.1 15.1%
EPS before exceptionals (pence) 24.5 21.0 16.7%
Operating cash flow before exceptionals 90.2 69.8 29.2%
Statutory basis
Revenue 331.0 294.5
Operating profit 64.5 51.3
Profit before tax 59.3 37.1
EPS (pence) 23.8 13.8
Cash generated from operations 90.2 56.2
Total dividend (pence) 9.5 5.8
*Pro-forma basis is stated after making the following
adjustments:
(i) deducting an additional GBP1.2m of overheads in 2016 to make
it comparable with the plc cost structure in 2017;
(ii) replacing finance charges in 2016 and recalculating
assuming that the debt structure at IPO was in place throughout the
year; and
(iii) excluding exceptional items totalling GBP1.8m in 2017 and
GBP8.9m in 2016 as detailed in note 3.
Reconciliation from pro-forma basis to the statutory basis is
included within the business review.
HIGHLIGHTS
-- Revenue increase of 10.4% (excluding benefit of Bison
acquisition) due to strong demand in the new build residential
market leading to double digit increase in brick and aggregate
block volumes
-- EBITDA increase of GBP6.0m due to higher volumes and prices,
which mitigated higher input costs and planned cost increases
enabling the business to operate stand-alone since listing
-- Bison acquisition completed in September for GBP20.0m,
providing a leadership position in precast concrete market and a
platform for future product development
-- Strong cash flow performance resulting in GBP31.5m reduction
in net debt to GBP60.8m at 31 December 2017, representing 0.8 times
adjusted EBITDA
-- Total dividend proposed of 9.5 pence per share, an increase
of 10.5% over the annualised total for 2016
Stephen Harrison, Chief Executive Officer, commented:
"Forterra delivered a strong profit and cash performance in
2017, our first full year as a listed company. Revenue was up over
10%, primarily due to a strong performance from the new build
residential market, and we also completed the strategically
important acquisition of Bison which has given us a leadership
position in the precast concrete products market. We are
particularly pleased with our cashflow performance which enabled us
to reduce our net debt to EBITDA ratio to below one times after
paying for the acquisition.
"Following our strong performance in 2017, the current year has
started well with brick volumes for the first two months ahead of
the comparable period last year. Whilst the housing maintenance and
improvement market remains subdued, we continue to see good
activity levels from the new build residential market and
anticipate a more modest level of volume growth compared with the
prior year. As anticipated, price increases have now been agreed
with most customers in order to cover the increase in our cost
base.
"Based on our order book and indications from major customers,
our expectations for 2018 are unchanged.
"Whilst we are cautious of the impact of the current uncertainty
on the UK economy, the Board remains confident that the business is
well positioned to take advantage of the attractive market
fundamentals and of its ability to deliver sustainable shareholder
value."
ENQUIRIES
Forterra plc 44 1604 707 600
Stephen Harrison, Chief Executive Officer
Shatish Dasani, Chief Financial Officer
FTI Consulting +44 203 727 1340
Richard Mountain / Nick Hasell
A presentation for analysts will be held today, 14 March 2018,
at 10:30am at the offices of FTI Consulting. A recorded audiocast
of the presentation will be available on the Investors section of
our website (http://forterraplc.co.uk/) later in the day.
ABOUT FORTERRA PLC
Forterra is one of the leading manufacturers of building
products for the UK building and construction industry. The Group's
product range comprises of clay bricks, Thermalite blocks,
aggregate blocks, Red Bank chimney, roofing and flue systems, Bison
precast concrete and flooring products and Formpave permeable block
paving. The Group operates from 18 manufacturing facilities in
total and was listed on the London Stock Exchange's Main Market in
April 2016.
The Group's three primary businesses are:
-- Bricks: the Group is the second largest manufacturer of
bricks in Great Britain and is the only manufacturer of the iconic
and original Fletton brick sold under the London Brick(R) brand.
The Group operates nine brick manufacturing facilities in Great
Britain with a total production capacity of 575 million bricks per
annum;
-- Blocks: the Group is a leading manufacturer of aircrete
blocks in Great Britain which the Group sells under its
Thermalite(R) brand. The Group also manufactures aggregate blocks,
for which it achieves strong sales in the East and South East of
England. The Group operates four block manufacturing facilities in
Great Britain; and
-- Bespoke Products: the Group's bespoke products range
comprises precast concrete, concrete block paving and chimney and
roofing solutions, each of which is primarily specified, made to
measure, or customised to meet the customer's specific needs. The
Group's precast flooring products are complemented by the Group's
full design and nationwide installation services, while certain
other products, including concrete block paving and chimney flues,
are complemented by the specification and design services. The
Bespoke Products business operates from five manufacturing
facilities in Great Britain, including the recently acquired site
at Swadlincote, Derbyshire.
BUSINESS REVIEW
Following the Initial Public Offering (IPO) in April 2016,
Forterra made good progress during 2017 in its first full year as a
listed company. The previous private equity owners Lone Star Funds
sold their remaining holding in the Group in April 2017, resulting
in 100% free float in the market.
Forterra, which originated from the building products business
of Hanson plc, is a UK leader in manufactured masonry products,
with a unique combination of strong market positions in clay bricks
and concrete blocks. The Group also has a leadership position in
the precast concrete products market, having acquired the Bison
business during 2017.
Within our clay bricks business, Forterra focuses on the
efficient manufacture of high volume extruded and soft mud bricks,
primarily for the housing market. The business is also the sole
manufacturer of the iconic Fletton brick sold under the London
Brick brand. Fletton bricks were used in the original construction
of nearly a quarter of England's existing housing stock and are
today used to match existing brickwork by homeowners carrying out
extension or improvement work. During 2017, we celebrated the 140th
anniversary of production of the Fletton brick. Within our concrete
blocks business, Forterra is one of the leading producers of both
aircrete and aggregate blocks, the former being sold under one of
the country's principal aircrete brands of Thermalite.
STRATEGY
The Group's objective of generating sustainable shareholder
value is achieved through delivery of the following strategic
priorities:
-- drive for a flexible, efficient manufacturing base and align capacity to market conditions;
-- maintain strong market positions in our core products; and
-- expand the range of products and services offered through
both organic and appropriate bolt-on acquisitions.
These priorities are underpinned by having high performing
people throughout the business and continuing to strengthen
customer relationships.
During the year, the Group completed the acquisition of the
trade and certain assets of Bison Manufacturing Limited from Laing
O'Rourke which enabled us to take a leadership position in the UK
precast concrete market whilst also reducing capacity constraints
within our business. The business has traded in line with our
expectations following the acquisition and the integration process
is well-advanced. We have rebranded our whole precast concrete
business as Bison Precast, recognising the strength of the brand in
the marketplace.
The UK brick market has grown strongly over recent years, and
capacity utilisation has increased. As outlined previously, we have
prioritised debottlenecking projects at four sites in order to
increase capacity by around 40 million bricks which has been less
capital-intensive, whilst increasing plant efficiency and reducing
unit production costs. The last of these projects is being
undertaken at our Accrington facility in the summer of 2018.
We are completing the evaluation for building new brick
manufacturing capacity and have considered a number of options
including using brownfield sites owned by the Group with existing
permissions for extracting mineral, and also redeveloping one of
our existing brick facilities. We anticipate making an announcement
on this over the coming months.
HEALTH & SAFETY
Forterra is committed to the highest safety standards for all
employees, sub-contractors and visitors to our various facilities.
During the year, we have continued the initiatives taken in this
area including the Building Safety Together programme and safety
training for employees to build awareness and good working
practice. In addition, each Board Director has undertaken at least
one Health and Safety site visit in 2017 and will do a minimum of
two such visits each year going forward. This emphasises to the
workforce the importance placed by the Board on Health and Safety
and is part of driving a strong safety culture across the
Group.
Our progress on health and safety during the year was
overshadowed by a serious accident suffered by one of our employees
at a brick manufacturing facility which is subject to an ongoing
investigation. We will report on the outcome and the actions
implemented to reinforce safety processes, training and awareness
once this has concluded.
2017 RESULTS
Sales for the year of GBP331.0m were ahead of last year by 10.4%
excluding the benefit of the Bison acquisition made in September
2017. The sales growth was primarily driven by a strong performance
from the new build residential market, leading to a double digit
increase in brick and aggregate block volumes over 2016. Aircrete
block volumes were marginally lower than prior year, but
strengthened in the second half due to greater availability of raw
materials. Precast flooring volumes excluding the Bison acquisition
were up by low single digits. The Group achieved price increases
across all product ranges to mitigate increases in the operating
cost base.
Earnings before interest, tax, depreciation and amortisation
(EBITDA) of GBP75.4m for the year was GBP6.0m ahead of the
comparable pro-forma result for 2016 due to higher sales volumes
and price increases as outlined above offset by higher costs for
raw materials, energy, labour and distribution. As set out in the
half year results, the Group was running with a lower level of
overheads and operating expenditure in the first part of 2016
pre-IPO, and since listing in April 2016 budgeted investment has
been made in specific areas such as IT, sales & marketing, HR
and business development to take the Group forward as a stand-alone
entity. The full year effect of this in 2017 compared with the
prior year was GBP1.9m, and this investment is now complete.
EBITDA for 2016 has been adjusted to aid comparison to 2017 by
deducting additional PLC costs of GBP1.2m, reflecting the timing of
the Group's Initial Public Offering (IPO) which took place in April
2016. In addition, exceptional costs are excluded and the finance
cost has been calculated assuming that the post-IPO debt structure
was in place throughout the period. It will not be necessary to use
pro-forma figures in future years.
The acquisition of the Bison business from Laing O'Rourke for
GBP20.0m was completed in September 2017, and the contribution from
the business from the date of purchase is estimated at sales of
GBP5.8m, EBITDA of GBP0.6m and operating profit of GBP0.1m. The
acquisition resulted in goodwill of GBP0.8m as described later in
the report.
EBITDA margin of 22.8% was lower than the comparable pro-forma
margin in 2016 of 23.6% due to the additional costs described
above, change in sales mix which was weighted more towards new
build residential projects, and the effect of the Bison
acquisition.
The profit before tax and exceptional items of GBP61.1m was
GBP8.0m higher than the pro-forma result for 2016, benefitting from
the higher volumes and reduced interest costs arising from lower
debt and the refinancing of facilities during the year.
Profit before tax on a statutory basis was GBP59.3m for 2017
compared with prior year of GBP37.1m. As well as the trading
factors described above, there was a higher finance charge in 2016
due to the increased net debt and higher interest rate in place
under the pre-IPO ownership structure. Exceptional charges in 2017
were GBP1.8m (2016: GBP8.9m), arising from the writing-off of
previously capitalised IPO financing costs upon completion of the
Group's refinancing in July 2017.
CURRENT TRADING AND OUTLOOK
Following our strong performance in 2017, the current year has
started well with brick volumes for the first two months ahead of
the comparable period in 2017. Whilst the housing maintenance and
improvement market remains subdued, we continue to see good
activity levels from the new build residential market and
anticipate a more modest level of volume growth compared with the
prior year.
As anticipated, price increases have now been agreed with most
customers in order to cover the increase in our cost base.
Based on our order book and indications from major customers,
our expectations for 2018 are unchanged.
Whilst we are cautious of the impact of the current uncertainty
on the UK economy, the Board remains confident that the business is
well positioned to take advantage of the attractive market
fundamentals and of its ability to deliver sustainable shareholder
value.
EARNINGS PER SHARE AND DIVID
Earnings per share (EPS) before exceptionals was 24.5 pence
compared with 21.0 pence pro-forma EPS for 2016, an increase of
16.7%. The increase reflected the higher level of profit and also a
lower effective tax rate of 20.0% compared with 20.9% for 2016.
Basic EPS for 2017 was 23.8 pence compared with 13.8 pence in
2016.
The Board is recommending a final dividend of 6.4 pence per
share, which together with the interim dividend, would make a total
of 9.5 pence for the full year. This compares with the total
dividend in 2016 of 5.8 pence for the period post IPO, and the
increase over the annualised total for 2016 is 10.5%. The final
dividend will be paid on 5 July 2018 to those shareholders on the
register as at 15 June 2018.
The dividend is in line with the progressive dividend policy
adopted by the Board and demonstrates the progress made by the
Group in reducing net debt and our confidence in the business going
forward.
CASH FLOW, BORROWINGS AND FACILITIES
Operating cash flow before exceptionals for the year of GBP90.2m
was GBP20.4m higher than 2016, due to a significant improvement in
trade working capital and higher profitability. Brick inventory
reduced in the year due to the increased levels of demand and there
was a continued good level of cash collections reflected in the
year end cash balance arising from the busy last few months of the
year. Debtor days on a countback basis were 40 days, a small
increase from the 39 days at December 2016. The normal seasonal
pattern for working capital is an increase in the first half as
inventory is built ahead of the busy Spring selling season and
receivables are higher, followed by a reduction towards the end of
the year.
Capital expenditure for the year increased by GBP1.7m to
GBP10.8m and included the project to upgrade the dryers at the
Claughton brick facility and increase capacity. It also included
investment being made to upgrade IT systems across the
business.
Net cash flow includes the acquisition of the Bison business in
September 2017 for a consideration of GBP20.0m.
CASH FLOW - HIGHLIGHTS 2017 2016
GBPm GBPm
---------------------------------------------- ------- -------
Operating cash flow before exceptional items 90.2 69.8
Exceptional payments - (13.6)
------- -------
Cash generated from operations 90.2 56.2
------- -------
Interest paid (3.3) (12.4)
Tax paid (9.3) (6.3)
Capital expenditure:
- maintenance (7.6) (7.4)
- expansion (3.2) (1.7)
Acquisition of Bison (20.0) -
Dividends paid (13.8) (4.0)
Debtor days 40 39
---------------------------------------------- ------- -------
Net debt at 31 December 2017 was GBP60.8m compared with GBP92.3m
at the start of the year and GBP155.0m at IPO in April 2016. The
reduction in net debt during the year of GBP31.5m after paying for
the Bison acquisition is testament to the strong operating cash
generation of the business. Since IPO, the free cash flow generated
by the business has been over GBP130m enabling both organic
investment through new product development, debottlenecking and
efficiency projects, and investment through acquisition. It has
also enabled the Board to follow a progressive dividend policy
whilst strengthening the balance sheet.
Net debt to EBITDA (calculated with reference to the last twelve
months of earnings before exceptionals) was 0.8 times at 31
December 2017 compared with 1.3 times at December 2016 and 2.2
times at IPO. For this purpose, the net debt excludes capitalised
finance costs in line with the calculation required by the banking
covenant.
The Group's debt facility, which was agreed as part of the IPO,
was successfully amended in July 2017 and replaced by a new
RCF-only committed facility of GBP150m with a group of major
international banks. The term of the facility has been extended by
a year to July 2022. In addition, an accordion facility of GBP50m
has been agreed. The financial covenants are unchanged but there is
a reduction in the interest cost under the new facility with
interest set at LIBOR plus a margin of 125 to 225 basis points
depending on the leverage. The new facility will provide a more
efficient and flexible form of funding than the previous structure
of a large term loan and much smaller RCF.
The Group met its covenant tests comfortably at 31 December
2017.
PENSIONS
The Group has no defined benefit pension scheme in place, with
the legacy liabilities of the previous pension scheme left with the
HeidelbergCement AG Group when the business was divested in 2015.
There is a defined contribution arrangement in place and pension
costs for the year amounted to GBP5.4m (2016: GBP5.2m).
BRICKS AND BLOCKS 2017 2016 Change
GBPm GBPm
--------------------------- ------ ------ -------
Revenue 249.5 221.3 12.7%
EBITDA* 69.1 63.6
EBITDA (pro-forma) 69.1 62.7 10.2%
EBITDA margin (pro-forma) 27.7% 28.3%
* there were no exceptional items relating to the segment in
2017 or 2016
The Group has a unique combination of strong market positions in
both clay brick and concrete blocks. It is also the only
manufacturer of the iconic and original Fletton brick sold under
the London Brick brand. The Group operates nine brick manufacturing
facilities across the country with a total production capacity of
575 million bricks per annum. It is also a leader nationally in the
aircrete block market, operating from facilities at Newbury
(Berkshire) and Hams Hall in the Midlands. The aggregate blocks
business has a leading position in the important South East and
East of England markets with well-located manufacturing facilities
at Milton (Oxfordshire) and Whittlesey (near Peterborough).
Revenue increased by 12.7% compared with 2016, reflecting strong
demand from the new build residential market. Brick volumes were up
by double digits, benefitting also from the extra soft mud capacity
installed in 2016 at our Measham facility. The blocks business also
performed well, with aggregate block volumes increasing strongly
facilitated by an additional shift and higher capacity utilisation
at the Oxfordshire plant in particular. Whilst overall aircrete
sales volume were down slightly on prior year, the business has
performed more consistently during the year due to securing a
number of alternative raw material supply sources. Production
volumes of aircrete increased, enabling inventory levels to be
rebuilt in order to maintain customer service levels during
2018.
Price increases were achieved across each of the product lines
in line with our expectations to offset increases in the cost
base.
EBITDA of GBP69.1m was up by 10.2% against the comparative
pro-forma EBITDA for 2016 due to increased sales volumes and price
rises which offset higher costs of energy, raw materials,
distribution and labour. The result was also adversely impacted by
sales mix arising from higher sales to the volume housebuilders,
higher repair costs due to maintenance carried out at brick
facilities including at Accrington, Claughton and Measham, and the
planned cost increases made since IPO as described earlier in this
statement.
The Group continues to invest in brand awareness and during the
year a successful campaign was run to celebrate the heritage and
140 year anniversary of the Fletton brick. This included marketing
promotions at builders' merchants, national advertising using both
traditional and social media and donation of the product for use by
apprentice bricklayers.
A number of new bricks were launched in the year to expand the
range and improve customer choice. The number of bricks in the
Measham soft mud range has more than doubled during the year in
addition to an expanded range of extruded bricks at Claughton,
Accrington and Howley Park. There has been specific focus on the
smaller regional and local housebuilders by working with merchants
and brick distributors, as well as strengthening relationships with
large housebuilders. The dedicated team established to serve the
Commercial and Specification segments gained traction in securing a
number of successful projects, including the Priority School
Building Programme, university buildings and student accommodation
and the ongoing regeneration of the northern and Scottish cities.
The Group's bricks made at the Wilnecote facility and used at
Sheffield Hallam University won the Best Education Category at the
2017 Brick Awards.
The project to replace the dryers at the Claughton brick
facility in Lancashire was completed to schedule, resulting in
improved efficiency and a capacity increase of over 5 million
bricks per annum. Following the completion of the project, the
Claughton facility was brought back on line in the second half of
the year with a total annual production capacity of 50 million
bricks. The nearby Accrington facility also resumed manufacturing
in the last quarter of the year, bringing back into production its
capacity of 45 million bricks per annum which will increase by a
further 10 million during the summer of 2018 through completion of
a capital investment programme.
The scope of the debottlenecking project at Desford was
redefined in order to increase capacity in the short term by around
5 million bricks per annum by replacing the kiln burners at a cost
of GBP0.9m, which was less than originally planned. This project
was completed in early 2018.
Whilst brick inventories reduced during the year, the measures
taken at plants such as at Claughton, Accrington and Desford as
described above will lead to increased production during 2018 and
enable the business to continue providing a good level of customer
service.
The initiatives taken during the last two years in securing
supply of Pulverised Fuel Ash (PFA) used in the production of
aircrete blocks has enabled more consistent production during 2017.
The Group has recently secured a good supply of conditioned (wet)
PFA and capital expenditure of GBP1.9m has been approved to convert
the Hams Hall facility to enable the plant to use 100% wet or dry
PFA, or a mixture of the two. The project is planned to be
completed during the first half of 2018 and will provide greater
flexibility and resilience in the production capability for
aircrete blocks.
BESPOKE PRODUCTS 2017 2016 Change
GBPm GBPm
--------------------------- ----- ----- -------
Revenue 83.6 74.8 11.8%
EBITDA * 6.3 7.0
EBITDA (pro-forma) 6.3 6.7 (6.0)%
EBITDA margin (pro-forma) 7.5% 9.0%
* there were no exceptional items relating to the segment in
2017 or 2016
The Bespoke Products division focuses on specification-led,
made-to-order products comprising: precast concrete, block paving,
chimney and roofing solutions, much of which is primarily
made-to-measure or customised to meet the customer's specific
needs.
Overall revenue for the division grew by GBP8.8m (11.8%) or by
GBP3.0m (4.0%) when the benefit of the Bison acquisition is
excluded.
EBITDA stated on a proforma basis however fell by GBP0.4m (6.0%)
to GBP6.3m as the precast concrete business faced several headwinds
during the year and also due to the planned cost increases made
since IPO as described before. EBITDA margin (stated on a proforma
basis) reduced from 9.0% in 2016 to 7.5% in 2017.
Precast concrete
Precast concrete products are designed, manufactured and shipped
nationwide from the Swadlincote, Hoveringham and Somercotes
facilities. These products cover:
-- Hollowcore floors, which are used for upper floors of
multi-family and commercial developments, with the majority of
floors fitted by the in-house installations team;
-- Jetfloor, which was the UK's first system to use expanded
polystyrene blocks combined with a structural concrete topping to
provide high levels of thermal insulation;
-- Beam and Block flooring, a traditional and cost effective
suspended flooring system for ground floors in domestic and
commercial applications;
-- Structural Precast Components including precast concrete
walls used in applications such as hotels and prisons, concrete
beams used in the construction of building frames as well as stadia
components;
-- a range of concrete retaining walls, culverts, Omnia
Bridgedeck, barriers and bespoke products for the housing,
commercial, infrastructure and utility markets. The Group's
engineers and designers are able to advise on all aspects of a
project and are supported by technical specialists to ensure an
efficient and effective solution; and
-- standard and bespoke precast concrete staircases and landings
which are suitable for both commercial and residential
projects.
The highlight of 2017 was the acquisition of the trade and
certain assets of Bison Manufacturing Limited which was completed
in September. The Swadlincote plant is the largest and most
technically advanced hollowcore manufacturing facility in the UK.
In addition, the site includes a specialist precast facility
capable of producing a wide range of bespoke precast concrete
products.
As well as a state of the art factory, a well-trained and
dedicated workforce and an ongoing supply agreement with Laing
O'Rourke the acquisition also included the highly respected and
well known Bison brand.
The combined Forterra and Bison precast concrete business has
already been rebranded as 'Bison Precast', allowing the wider
business to leverage what is regarded as the leading UK precast
concrete brand.
Prior to the acquisition, the Swadlincote plant had been
operating at around 50% of its capacity. The integration of this
facility into the wider Forterra business is progressing well with
the aim of having this factory running at a much higher level of
capacity utilisation by the summer of 2018. Transferring hollowcore
production to Swadlincote will facilitate the release of production
capacity at the Hoveringham and Somercotes facilities allowing
increased output of precast concrete products as well as creating
opportunities to add new and innovative products to the range. The
acquisition is performing in line with our expectations with the
Swadlincote facility already making a positive contribution to
operating profit.
Another notable success was the securing by the Somercotes
facility of the contract to supply precast concrete drainage
channels and box culverts to the Hinkley Point C construction
project. This contract award demonstrates Forterra's capability to
supply a prestigious infrastructure project where quality and
service are of paramount importance.
Aside from the successes above, 2017 was a challenging year for
the precast concrete business. The business faced issues associated
with the supply of the expanded polystyrene blocks which are used
in the jetfloor system and also saw significant mid-year cost
volatility on this important input which could not be fully
recovered from customers. In addition, the business faced a number
of operational challenges and inefficiencies in the main caused by
operating the Hoveringham facility at levels of utilisation which
were above its normal operating capacity. The acquisition of the
Swadlincote factory provides the required additional capacity and
removes this constraint for the foreseeable future.
Formpave
Formpave, based at our Coleford site, designed the UK's first
permeable block paving solution almost 20 years ago and continues
to be a leading authority in the design and specification of
sustainable urban drainage systems ('SuDS') using the Group's
permeable block paving.
Products sold under the Formpave brand include:
-- Aquaflow SuDS, a patented filtration system that allows
rainwater to be filtered and cleaned before being percolated into
the ground or a patented attenuation (tanked) system allowing water
to be collected and released into watercourses;
-- a wide range of high quality precast concrete standard block
paving to suit all projects from commercial to domestic
applications, offering a selection of colours, block types and
finishes, including EcoGranite, which contains up to 77% recycled
content, and Chartres, which matches the stone traditionally used
in certain heritage sites; and
-- a range of kerbs, edging, step systems and transitions
suitable for use with conventional block and permeable block
paving.
Formpave delivered a strong result in 2017 with both revenues
and EBITDA ahead of the 2016 results. At the beginning of the year
Formpave successfully installed a replacement block press machine
which increases capacity and provides greater efficiency across its
product range whilst also offering the ability to support the
aggregate block business with additional output if desired.
Commercially, Formpave continues to make progress in bringing to
market its Aquaflow Thermapave system, which combines ground source
heat pump ('GSHP') technology with its patented Aquaflow paving
system.
Red Bank
Red Bank manufactures its products from its facility alongside
the Measham quarry and brick facility, producing a wide range of
chimney, roofing and flue systems. Products include fire-backs,
clay and concrete flue liners (developed to meet the growing demand
for flue products to suit modern efficient wood-burning, multi-fuel
and gas-fired appliances), chimney pots and ridge tiles and a
complete bespoke manufacturing facility to accommodate unique
customer requirements.
Red Bank had a successful year in 2017, recording double-digit
increase in sales and EBITDA compared with prior year. The business
has implemented measures to reinvigorate its product offering,
improve margins and enhance customer service. It ran a number of
training workshops for distributors in order to improve awareness
of its product range and support sales.
OTHER FINANCIAL INFORMATION
EXCEPTIONAL ITEMS
Exceptional items totalled GBP1.8m in 2017 compared with GBP8.9m
in the previous year:
2017 2016
GBPm GBPm
--------------------------------------------- ------ ------
IPO capitalised financing costs written off (1.8) -
Transaction costs - (9.1)
Separation costs - (1.3)
Loss on disposal of Structherm - (0.1)
Indemnity payment received - 1.6
Total exceptional items (1.8) (8.9)
--------------------------------------------- ------ ------
Following the refinancing of the Group's borrowings facilities
during 2017, the balance of the capitalised financing costs of
GBP1.8m incurred when the previous facility was put in place at IPO
has been written-off.
FINANCE COSTS
The total finance costs for 2017 were GBP5.2m compared with
GBP14.2m in 2016. The 2017 charge comprises the GBP1.8m exceptional
cost described above and GBP3.4m interest cost.
The Group had a much higher debt level and interest rate during
the first few months of 2016 under the previous ownership structure
prior to the IPO. The pro-forma annual finance cost for 2016 was
GBP5.9m assuming that the debt facility at IPO had been in place
throughout the year, and this has been used to calculate the
pro-forma profit before tax and earnings per share before
exceptional items.
The reduction in the underlying finance cost from 2016 to 2017
is due to the significant reduction in borrowings since IPO, and
also the benefit from refinancing the borrowing facility during
2017.
TAXATION
The effective tax rate excluding exceptional items was 20.0%
(effective rate excluding exceptional items for 2016: 20.9%). The
Group derives substantially all its revenue from the UK and the
rate is based on the UK corporation tax rate adjusted for permanent
non-deductible items such as depreciation on non-qualifying
assets.
The effective tax rate after including exceptional items was
19.9% (2016: 25.9%).
SHARE SCHEMES
During the year, the second offering of the Company-wide
employee Sharesave scheme was successfully launched and this,
together with the first offer made in 2016, resulted in around
two-thirds of employees participating by saving regularly under the
scheme.
In order to have sufficient shares for the vesting of the 2016
Sharesave options as well as any shares required for the
Performance Share Plan and the Deferred Annual Bonus Plan awards,
the Board, subject to continued shareholder approval being granted
at the AGM, intends to fund the market purchase of around 240,000
shares each month commencing from March 2018 through the Employee
Benefit Trust. It is anticipated that this would provide around 5m
shares by December 2019 which would be sufficient to meet the
Company's obligation in respect of the Sharesave options which vest
on 1 December 2019, as well as the other share schemes vesting
prior to this date.
The employees' savings pool accumulated to that date is
estimated at GBP6.4m (based on the exercise price of 135p per
share) and this amount would be received by the Company on the
employees exercising their Sharesave options.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has established processes for identifying, evaluating
and managing the key risks which could have an impact upon
performance, and is formalising these under the direction of the
Board Risk Committee.
The principal risks and uncertainties facing the business are
detailed in pages 34-37 of the Annual Report and Accounts published
in April 2017, which is available on the Group website
(forterraplc.co.uk). The Group has reviewed these risks and
concluded that they have not materially changed since the date of
the report.
GOING CONCERN & VIABILITY STATEMENT
The Directors have assessed the Group's current financial
position and the factors likely to affect performance in the coming
year in light of current and anticipated economic conditions. Based
on this assessment the Directors can have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for a period of at least 12 months from the date of
approval of the financial statements. On this basis the going
concern concept has been adopted in the preparation of these
preliminary financial statements.
The Directors have conducted a review and assessed the prospects
and viability of the Group. They confirm that they have a
reasonable expectation that the Group will continue in operation,
meet liabilities as they fall due and will not breach covenants
over the three year period covered by the review.
PRO-FORMA ADJUSTMENTS
The following pro-forma adjustments have been made to enable a
better understanding of the result compared with the prior
year:
2017 2016
GBPm GBPm
--------------------------------------------------------------- ------- -------
Operating profit (statutory basis) 64.5 51.3
Exceptional items - 8.9
--------------------------------------------------------------- ------- -------
Operating profit before exceptionals 64.5 60.2
Additional costs in 2017 as a plc - (1.2)
--------------------------------------------------------------- ------- -------
Operating profit before exceptionals (pro-forma basis) 64.5 59.0
Finance charge (based on debt structure at IPO for full year) (3.4) (5.9)
--------------------------------------------------------------- ------- -------
PBT before exceptionals (pro-forma basis) 61.1 53.1
Tax charge at effective rate (12.2) (11.1)
--------------------------------------------------------------- ------- -------
Earnings before exceptional items (pro-forma basis) 48.9 42.0
--------------------------------------------------------------- ------- -------
Number of shares (millions) 200.0 200.0
--------------------------------------------------------------- ------- -------
EPS before exceptionals (pence) 24.5 21.0
--------------------------------------------------------------- ------- -------
EBITDA is calculated by adding back depreciation and
amortisation to operating profit:
2017 2016
GBPm GBPm
-------------------------------------------------------- ----- -----
Operating profit before exceptionals (pro-forma basis) 64.5 59.0
Depreciation and amortisation 10.9 10.4
-------------------------------------------------------- ----- -----
EBITDA before exceptionals (pro-forma basis) 75.4 69.4
-------------------------------------------------------- ----- -----
FORWARD LOOKING STATEMENTS
Certain statements in this annual report are forward looking.
Although the Group believes that the expectations reflected in
these forward looking statements are reasonable, we can give no
assurance that these expectations will prove to have been correct.
Because these statements contain risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward looking statements.
We undertake no obligation to update any forward looking
statements, whether as a result of new information, future events
or otherwise.
Stephen Harrison Shatish Dasani
Chief Executive Officer Chief Financial Officer
14 March 2018
Consolidated Statement of Total Comprehensive Income
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Note GBPm GBPm
----------------------------------------------------------------------------- ---- ------- -------
Revenue 2 331.0 294.5
Cost of sales (196.8) (175.2)
----------------------------------------------------------------------------- ---- ------- -------
Gross profit 134.2 119.3
Distribution costs (48.9) (43.6)
Administrative expenses (21.2) (26.7)
Other operating income 0.4 2.3
----------------------------------------------------------------------------- ---- ------- -------
Operating profit 2 64.5 51.3
EBITDA before exceptional items 75.4 70.6
Exceptional items 3 - (8.9)
Depreciation and amortisation (10.9) (10.4)
----------------------------------------------------------------------------- ---- ------- -------
Operating profit 64.5 51.3
----------------------------------------------------------------------------- ---- ------- -------
Finance expense before exceptional items (3.4) (14.2)
Exceptional finance expense 3 (1.8) -
----------------------------------------------------------------------------- ---- ------- -------
Net finance expense 4 (5.2) (14.2)
----------------------------------------------------------------------------- ---- ------- -------
Profit before tax 59.3 37.1
Income tax expense 5 (11.8) (9.6)
----------------------------------------------------------------------------- ---- ------- -------
Profit for the year attributable to equity shareholders 47.5 27.5
Total comprehensive income for the year attributable to equity shareholders 47.5 27.5
----------------------------------------------------------------------------- ---- ------- -------
Earnings per share Pence Pence
----------------------------------------------------------------------------- ---- ------- -------
Basic earnings per share 6 23.8 13.8
Diluted earnings per share 6 23.4 13.7
The calculation of earnings per share on a pro-forma basis is
shown within note 6 of these preliminary financial statements.
Note: The classification of expenses within the Consolidated
Statement of Total Comprehensive Income has been revised in 2017
and restated in 2016 to better align internal and external
financial reporting (see note1).
Consolidated Balance Sheet
AT 31 DECEMBER 2017
2017 2016
Note GBPm GBPm
--------------------------------------------------------- ---- ------- -------
Assets
Non-current assets
Intangible assets 15.8 13.7
Property, plant and equipment 165.2 147.2
Deferred tax assets - 0.4
--------------------------------------------------------- ---- ------- -------
181.0 161.3
--------------------------------------------------------- ---- ------- -------
Current assets
Inventories 36.3 39.0
Trade and other receivables 33.0 31.6
Cash and cash equivalents 29.0 56.2
--------------------------------------------------------- ---- ------- -------
98.3 126.8
--------------------------------------------------------- ---- ------- -------
Total assets 279.3 288.1
--------------------------------------------------------- ---- ------- -------
Current liabilities
Trade and other payables (61.2) (51.5)
Trade and other payables with related parties - (0.7)
Current tax liabilities (5.8) (3.8)
Loans and borrowings 8 (0.4) (10.7)
Provisions for other liabilities and charges (7.9) (5.7)
--------------------------------------------------------- ---- ------- -------
(75.3) (72.4)
--------------------------------------------------------- ---- ------- -------
Non-current liabilities
Loans and borrowings 8 (89.4) (137.8)
Provisions for other liabilities and charges (9.1) (8.7)
Deferred tax liabilities (0.8) -
--------------------------------------------------------- ---- ------- -------
(99.3) (146.5)
--------------------------------------------------------- ---- ------- -------
Total liabilities (174.6) (218.9)
--------------------------------------------------------- ---- ------- -------
Net assets 104.7 69.2
--------------------------------------------------------- ---- ------- -------
Capital and reserves attributable to equity shareholders
Ordinary shares 2.0 2.0
Retained earnings 102.7 67.2
--------------------------------------------------------- ---- ------- -------
Total equity 104.7 69.2
--------------------------------------------------------- ---- ------- -------
Consolidated Statement of Cash Flows
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Note GBPm GBPm
--------------------------------------------------------- ---- ------- -------
Cash flows from operating activities
Operating profit before exceptional items 64.5 60.2
Adjustments for:
- Depreciation and amortisation 10.9 10.4
- Non-cash movement on provisions 3.1 (0.4)
- Share-based payments 1.5 0.5
- Other non-cash items - 0.3
- Profit on sale of property, plant and equipment (0.4) (0.2)
Changes in working capital:
- Inventories 3.0 1.7
- Trade and other receivables (1.4) (3.1)
- Trade and other payables 9.5 0.7
- Cash movement on provisions (0.5) (0.3)
--------------------------------------------------------- ---- ------- -------
Operating cash flow before exceptional items 90.2 69.8
Cash flow relating to exceptional items - (13.6)
--------------------------------------------------------- ---- ------- -------
Cash generated from operations 90.2 56.2
Interest paid (3.3) (12.4)
Tax paid (9.3) ( 6.3)
--------------------------------------------------------- ---- ------- -------
Net cash generated from operating activities 77.6 37.5
--------------------------------------------------------- ---- ------- -------
Cash flows from investing activities
Cash outflow on business combinations 10 (20.0) -
Purchase of property, plant and equipment (9.0) (9.0)
Purchase of intangible assets (1.8) (0.1)
Proceeds from sale of property, plant and equipment 0.6 0.3
--------------------------------------------------------- ---- ------- -------
Net cash used in investing activities (30.2) (8.8)
--------------------------------------------------------- ---- ------- -------
Cash flows from financing activities
Dividends paid 7 (13.8) (4.0)
Drawdown of borrowings 100.0 167.0
Repayment of borrowings (160.0) (156.7)
Finance arrangement fees paid (0.8) (3.0)
--------------------------------------------------------- ---- ------- -------
Net cash (used in)/generated from financing activities (74.6) 3.3
--------------------------------------------------------- ---- ------- -------
Net (decrease)/increase in cash and cash equivalents (27.2) 32.0
Cash and cash equivalents at the beginning of the period 56.2 24.2
--------------------------------------------------------- ---- ------- -------
Cash and cash equivalents at the end of the period 29.0 56.2
--------------------------------------------------------- ---- ------- -------
Consolidated Statement of Changes in Equity
FOR THE YEARED 31 DECEMBER 2017
Share Share Deferred Total
capital premium shares Retained earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------- -------- -------- -------- ----------------- -------
Balance at 1 January 2016 0.1 46.5 - (257.2) (210.6)
Total comprehensive income for the year - - - 27.5 27.5
Adjustment to reserves on Group reorganisation (0.1) (46.5) - - (46.6)
Issue of share capital 2.2 44.4 - - 46.6
Reclassification of ordinary shares to deferred shares (0.2) - 0.2 - -
Capitalisation of shareholder loan note - 255.8 - - 255.8
Capital reduction - (300.2) (0.2) 300.4 -
Dividends paid - - - (4.0) (4.0)
Share-based payments - - - 0.5 0.5
Balance at 31 December 2016 2.0 - - 67.2 69.2
-------------------------------------------------------- -------- -------- -------- ----------------- -------
Total comprehensive income for the year - - - 47.5 47.5
Dividends paid - - - (13.8) (13.8)
Share-based payments - - - 1.2 1.2
Tax on share-based payments - - - 0.6 0.6
-------------------------------------------------------- -------- -------- -------- ----------------- -------
Balance at 31 December 2017 2.0 - - 102.7 104.7
-------------------------------------------------------- -------- -------- -------- ----------------- -------
NOTES TO THE PRELIMINARY RESULTS
1 General information
Forterra plc ('Forterra' or the 'Company') and its subsidiaries
(together referred to as the 'Group') are domiciled in the United
Kingdom. The address of the registered office of the Company is 5
Grange Park Court, Roman Way, Northampton, England, NN4 5EA. The
Company is the parent of Forterra Holdings Limited and Forterra
Building Products Limited, which together comprise the group (the
'Group'). The principal activity of the Group is the manufacture
and sale of bricks, dense and lightweight blocks, precast concrete,
concrete block paving and other complementary building
products.
Forterra plc was incorporated on 21 January 2016 for the purpose
of listing the Group on the London Stock Exchange. Forterra plc
acquired the shares of Forterra Building Products Limited on 20
April 2016, which to that date held the Group's trade and assets,
before admission to the main market of the London Stock
Exchange.
Basis of preparation
Forterra plc was incorporated on 21 January 2016, however the
preliminary financial statements for the comparative period, year
ended 31 December 2016 have been prepared on the basis that
Forterra plc was in existence throughout that period. The terms of
the acquisition of Forterra Building Products Limited's shares was
such that the Group reconstruction should be accounted for as a
continuance of the existing Forterra Building Products Limited
group rather than as an acquisition. Accordingly the preliminary
results have been prepared by extracting financial information from
the consolidated statutory accounts of Forterra Building Products
Limited for the period prior to the incorporation of Forterra plc
in 2016.
In 2017, the classification of expenses has been changed
voluntarily; resulting in an increase in cost of sales and
distribution costs and corresponding decrease in administrative
expenses and other operating income. This change results in a
decrease in gross margin of 1.4% for the period ended 31 December
2016, although there is no net impact to the Consolidated Statement
of Total Comprehensive Income. Management have made this change to
align internal and external financial reporting, which management
are of the opinion, having reviewed the underlying nature of these
costs is a more accurate presentation. Comparative periods have
been restated to reflect this reclassification consistently.
The above restatements do not have any impact on the balance
sheet at 31 December 2016.
The preliminary results for the year ended 31 December 2017 have
been extracted from the audited consolidated financial statements,
which were approved by the Board of Directors on 14 March 2018. The
audited consolidated financial statements have not yet been
delivered to the Registrar of Companies but are expected to be
published by the end of April 2018. The auditors have reported on
those accounts; their report was unqualified and did not contain
statements under s498(2) or (3) of the Companies Act 2006.
This preliminary announcement has been prepared in accordance
with the accounting policies under IFRS as adopted by the EU.
Whilst the financial information included in this preliminary
announcement has been prepared in accordance with IFRS, this
announcement does not itself contain sufficient information to
comply with IFRS. This preliminary announcement constitutes a
dissemination announcement in accordance with Section 6.3 of the
Disclosures and Transparency Rules (DTR).
Copies of the Annual Report for the year ended 31 December 2017
will be mailed to those shareholders who have opted to receive them
by the end of April 2018 and will be available from the Company's
registered office at Forterra plc, 5 Grange Park Court, Northampton
and the Company's website (http://forterraplc.co.uk/) after that
date.
The preliminary results are presented in pounds sterling and all
values are rounded to the nearest hundred thousand unless otherwise
indicated
Going concern
The Group meets its day-to-day working capital requirements
through its cash reserves and borrowings. The Group's forecasts and
projections, taking account of reasonably possible changes in
trading performance, show that the Group should be able to operate
within the level of its current cash reserves and borrowings. After
making enquiries, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational
existence for at least one year from the date that the preliminary
financial statements are signed. The Group therefore adopts the
going concern basis in preparing its preliminary financial
statements.
2 Segmental Reporting
Management has determined the operating segments based on the
management reports reviewed by the Executive Committee that are
used to assess both performance and strategic decisions. Management
has identified that the Executive Committee is the chief operating
decision maker in accordance with the requirements of IFRS 8
'Operating segments'.
The Executive Committee considers the business to be split into
3 operating segments: Bricks, Blocks and Bespoke Products. The
principal activities of the operating segments are:
Bricks - Manufacture and sale of bricks to the construction
sector
Blocks - Manufacture and sale of concrete blocks to the
construction sector
Bespoke Products - Manufacture and sale of bespoke products to
the construction sector
The Executive Committee considers that for reporting purposes,
the operating segments above can be aggregated into two reporting
segments: Bricks and Blocks and Bespoke Products. The aggregation
of Bricks and Blocks is due to these operating segments having
similar long-term average margins, production process, suppliers,
customers and distribution methods.
The Bespoke Products range includes precast concrete (now
marketed under the 'Bison Precast' brand), permeable paving,
chimney and roofing solutions, each of which are typically
made-to-measure or customised to meet the customer's specific
needs. The precast concrete flooring products are complemented by
the Group's full design and nationwide installation services, while
certain other bespoke products, including permeable paving and
chimney flues, are complemented by the Group's bespoke
specification and design service.
Costs which are incurred on behalf of both segments are held at
the centre and these, together with general administrative
expenses, have been allocated to the segments for reporting
purposes using relative sales proportions in 2016. Management
considers that a split of 75% Bricks and Blocks and 25% Bespoke
products should be applied for 2017 and beyond as the growth of
Bespoke products through the Bison acquisition has not resulted in
additional central costs being incurred. Management considers this
an appropriate basis for the allocation.
The revenue recognised in the Consolidated Statement of Total
Comprehensive Income is all attributable to the principal activity
of the manufacture and sale of bricks, dense and lightweight
blocks, precast concrete, concrete paving and other complimentary
building products.
Substantially all revenue recognised in the Consolidated
Statement of Total Comprehensive Income arose within the UK.
Segment revenue and results:
2017
--------------------------------------- -------------------------------------------
Bricks and Blocks Bespoke Products Total
GBPm GBPm GBPm
--------------------------------------- ----------------- ---------------- ------
Segment revenue 249.5 83.6 333.1
Intersegment eliminations (2.1)
---------------------------------------- ----------------- ---------------- ------
Revenue 331.0
---------------------------------------- ----------------- ---------------- ------
EBITDA 69.1 6.3 75.4
Depreciation and amortisation (9.6) (1.3) (10.9)
---------------------------------------- ----------------- ---------------- ------
Operating profit 59.5 5.0 64.5
Finance costs before exceptional items (3.4)
Exceptional finance costs (1.8)
---------------------------------------- ----------------- ---------------- ------
Net finance expense (5.2)
---------------------------------------- ----------------- ---------------- ------
Profit before tax 59.3
---------------------------------------- ----------------- ---------------- ------
Segment assets:
2017
------------------------------ ------------------------------------------
Bricks and Blocks Bespoke Products Total
GBPm GBPm GBPm
------------------------------ ----------------- ---------------- -----
Property, plant and equipment 130.7 34.5 165.2
Intangible assets 8.1 7.7 15.8
Inventories 30.5 5.8 36.3
------------------------------- ----------------- ---------------- -----
Segment assets 169.3 48.0 217.3
Unallocated assets 62.0
------------------------------- ----------------- ---------------- -----
Total assets 279.3
------------------------------- ----------------- ---------------- -----
Other segment information:
2017
---------------------------------------- ---- ------------------------------------------
Bricks and Blocks Bespoke Products Total
Note GBPm GBPm GBPm
---------------------------------------- ---- ----------------- ---------------- -----
Property, plant and equipment additions 7.3 1.4 8.7
Property, plant and equipment acquired 10 - 20.0 20.0
Intangible asset additions 1.1 0.3 1.4
Intangible assets acquired 10 - 1.2 1.2
---------------------------------------- ---- ----------------- ---------------- -----
Customers representing 10% or greater of revenues were as
follows:
2017
----------- ------------------------------------------
Bricks and Blocks Bespoke Products Total
GBPm GBPm GBPm
----------- ----------------- ---------------- -----
Customer A 40.1 2.4 42.5
Customer B 31.0 4.4 35.4
Segment revenue and results:
2016
------------------------------------------ -----------------------------
Bricks and Bespoke
Blocks Products Total
GBPm GBPm GBPm
------------------------------------------ ---------- --------- ------
Segment revenue 221.3 74.8 296.1
Intersegment eliminations (1.6)
------------------------------------------- ---------- --------- ------
Revenue 294.5
------------------------------------------- ---------- --------- ------
EBITDA before exceptional items 63.6 7.0 70.6
Depreciation and amortisation (9.6) (0.8) (10.4)
------------------------------------------- ---------- --------- ------
Operating profit before exceptional items 54.0 6.2 60.2
Unallocated exceptional items (8.9)
------------------------------------------- ---------- --------- ------
Operating profit 51.3
Net finance expense (14.2)
------------------------------------------- ---------- --------- ------
Profit before tax 37.1
------------------------------------------- ---------- --------- ------
Segment assets:
2016
------------------------------ ----------------------------
Bricks and Bespoke
Blocks Products Total
GBPm GBPm GBPm
------------------------------ ---------- --------- -----
Property, plant and equipment 132.5 14.7 147.2
Intangible assets 7.4 6.3 13.7
Inventories 34.4 4.6 39.0
------------------------------- ---------- --------- -----
Segment assets 174.3 25.6 199.9
Unallocated assets 88.2
------------------------------- ---------- --------- -----
Total assets 288.1
------------------------------- ---------- --------- -----
Other segment information:
2016
---------------------------------------- ----------------------------
Bricks and Bespoke
Blocks Products Total
GBPm GBPm GBPm
---------------------------------------- ---------- --------- -----
Property, plant and equipment additions 7.7 0.5 8.2
Intangible asset additions 0.5 0.2 0.7
----------------------------------------- ---------- --------- -----
Customers representing 10% or greater of revenues were as
follows:
2016
----------- ------------------------------------------
Bricks and Blocks Bespoke Products Total
GBPm GBPm GBPm
----------- ----------------- ---------------- -----
Customer A 37.7 2.4 40.1
Customer B 31.9 4.5 36.4
3 Exceptional items
2017 2016
GBPm GBPm
----------------------------------------------- ----- -----
Exceptional administrative expenses:
Transaction costs - (9.1)
Separation costs - (1.3)
Exceptional other operating income/(expenses):
Loss on disposal of subsidiary - (0.1)
Indemnity payment received - 1.6
Exceptional finance expenses:
IPO capitalised financing costs written off (1.8) -
------------------------------------------------ ----- -----
(1.8) (8.9)
----------------------------------------------- ----- -----
Following the refinancing of the Group's borrowings facility
during 2017, the balance of the capitalised financing cost incurred
when the previous facility was put in place at IPO has been written
off.
Transaction costs in 2016 relate to the IPO completed in April
2016 and associated non-recurring professional fees.
Separation costs relate to the separation from Forterra Inc in
2016 and included rebranding, new office fit out costs, set up of
standalone IT operations and staff recruitment.
In October 2016 the Group disposed of its investment in
Structherm Limited and ceased to consolidate its assets,
liabilities and financial results.
A cash tax indemnity payment was received in the 2016 from
HeidelbergCement AG relating to previous tax paid. It was initially
recognised as a contingent asset at zero value but later revalued
to GBP1.6m upon confirmation of payment.
4 Net finance expense
2017 2016
GBPm GBPm
--------------------------------------------- ----- ------
Interest payable on related party borrowings - (10.2)
Interest payable on external borrowings (3.4) (3.8)
IPO capitalised financing costs written off (1.8) -
Other finance expense - (0.2)
--------------------------------------------- ----- ------
(5.2) (14.2)
--------------------------------------------- ----- ------
Up to the date of the IPO, both the debt level and interest rate
were significantly higher than the Group's post IPO financing
arrangements. This resulted in a higher finance charge for
2016.
5 Taxation
2017 2016
GBPm GBPm
-------------------------------------------------- ------ -----
Current tax
UK corporation tax on profit for the year (11.4) (8.3)
Prior year adjustment on UK corporation tax 0.2 0.1
--------------------------------------------------- ------ -----
Total current tax (11.2) (8.2)
--------------------------------------------------- ------ -----
Origination and reversal of temporary differences (0.5) (1.0)
Effect of change in tax rates 0.1 0.1
Effect of prior period adjustments (0.2) (0.5)
--------------------------------------------------- ------ -----
Total deferred tax (0.6) (1.4)
--------------------------------------------------- ------ -----
Income tax expense (11.8) (9.6)
--------------------------------------------------- ------ -----
2017 2016
GBPm GBPm
-------------------------------------------------------------------------------------------- ------ -----
Profit on ordinary activities before tax 59.3 37.1
Profit on ordinary activities multiplied by the rate of corporation tax in the UK of 19.25%
(2016: 20%) (11.4) (7.4)
Effects of:
Change in tax rate 0.1 0.1
Expenses not deductible for tax purposes (0.5) (1.9)
Prior period adjustments - (0.4)
--------------------------------------------------------------------------------------------- ------ -----
Income tax expense (11.8) (9.6)
--------------------------------------------------------------------------------------------- ------ -----
The main rate of UK corporation tax for 2017 is 19.25%, based on
a rate of 20% for the first three months of 2017 and 19% from 1
April 2017.
6 Earnings per share
Basic earnings per share (EPS) is calculated by dividing the
profit for the period attributable to equity shareholders by the
weighted average number of ordinary shares outstanding during the
period. Diluted EPS reflects the effect of the conversion of
dilutive options.
As the Group did not exist in its current form throughout the
full prior period, basic and diluted EPS has been calculated as if
the restructuring of the Group on admission to the London Stock
Exchange occurred at the beginning of the comparative period.
Basic Pro-forma
--------------------------------------------------- -------------- --------------
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
--------------------------------------------------- ------ ------ ------ ------
Operating profit for the year 64.5 51.3 64.5 51.3
Exceptional items - - - 8.9
Additional costs in 2017 as a stand-alone plc - - - (1.2)
Finance charge (5.2) (14.2) (3.4) (5.9)
---------------------------------------------------- ------ ------ ------ ------
Profit before taxation 59.3 37.1 61.1 53.1
Tax charge at effective rate (11.8) (9.6) (12.2) (11.1)
---------------------------------------------------- ------ ------ ------ ------
Profit for the year 47.5 27.5 48.9 42.0
---------------------------------------------------- ------ ------ ------ ------
Weighted average number of shares (millions) 200.0 200.0 200.0 200.0
Effect of share incentive awards and options 2.9 0.8 2.9 0.8
---------------------------------------------------- ------ ------ ------ ------
Diluted weighted average number of ordinary shares 202.9 200.8 202.9 200.8
---------------------------------------------------- ------ ------ ------ ------
Earnings per share:
Basic (in pence) 23.8 13.8
Diluted (in pence) 23.4 13.7
Pro-forma earnings per share:
Basic (in pence) 24.5 21.0
Diluted (in pence) 24.1 20.9
---------------------------------------------------- ------ ------ ------ ------
Pro-forma basis is presented as an additional performance
measure and is stated before exceptional items and after
adjustments to present additional plc costs incurred in 2017 and
finance costs comparatively in both years.
7 Dividends
2017 2016
GBPm GBPm
---------------------------------------------------------------------- ------ -----
Amounts recognised as distributions to equity holders in the year:
Interim dividend of 3.1p per share (2016: 2.0p) (6.2) (4.0)
Final dividend of 3.8p per share in respect of prior year (2016: nil) (7.6) -
---------------------------------------------------------------------- ------ -----
(13.8) (4.0)
---------------------------------------------------------------------- ------ -----
The Directors are proposing a final dividend for 2017 of 6.4p
per share, making a total payment for the year of 9.5p (2016:
5.8p).
The proposed final dividend is subject to approval by the
shareholders at the AGM and has not been included as a liability in
these preliminary financial statements.
8 Loans and borrowings
2017 2016
GBPm GBPm
-------------------------------------------------------- ----- -----
Non-current loans and borrowings
External bank loan - principal 90.0 140.0
- unamortised debt issue costs (0.6) (2.2)
-------------------------------------------------------- ----- -----
89.4 137.8
-------------------------------------------------------- ----- -----
Current loans and borrowings
-------------------------------------------------------- ----- -----
External bank loan - principal - 10.0
- interest 0.4 0.7
-------------------------------------------------------- ----- -----
0.4 10.7
-------------------------------------------------------- ----- -----
89.8 148.5
-------------------------------------------------------- ----- -----
As part of the IPO, on 26 April 2016 the Group entered into a
facilities agreement with a group of leading banks under which it
had access to a GBP150m term loan facility and a GBP30m revolving
credit facility for five years.
On 26 July 2017 the Group refinanced by repaying amounts
outstanding under existing facilities and entering into a committed
GBP150m revolving credit facility with a new group of leading
banks. The new facility has been extended by a year over the
original facility and therefore is in place until July 2022. An
accordion facility of GBP50m has also been agreed.
Interest is payable on amounts drawn down under the agreement at
a rate of LIBOR plus a variable margin ranging from 1.25% to 2.25%,
a 25bps reduction from the original facility.
The new facility is subject to the same financial and
non-financial covenants as the original facility and is also
secured by fixed charges over the shares of Forterra Building
Products Limited and Forterra Holdings Limited.
9 Net debt
The analysis of net debt is as follows:
2017 2016
GBPm GBPm
-------------------------- ------ -------
Cash and cash equivalents 29.0 56.2
External borrowings (89.8) (148.5)
-------------------------- ------ -------
(60.8) (92.3)
-------------------------- ------ -------
Reconciliation of net cash flow to net debt
2017 2016
GBPm GBPm
--------------------------------------------------------- ------- --------
Net cash inflow from operating activities 77.6 37.5
Net cash outflow from investing activities (30.2) (8.8)
Dividends paid (13.8) (4.0)
Net cash flow in period (excluding financing cash flow) 33.6 24.7
Other movements (2.1) 1.4
Restructuring movements - 263.0
------------------------------------------------------------- ------- --------
Decrease in net debt 31.5 289.1
------------------------------------------------------------- ------- --------
Net debt at the start of the period (92.3) (381.4)
------------------------------------------------------------- ------- --------
Net debt at the end of the period (60.8) (92.3)
------------------------------------------------------------- ------- --------
10 Business Combinations
Acquisition of trade and certain assets of Bison Manufacturing
Limited
On 7th September 2017 the Group acquired the trade and certain
assets of Bison Manufacturing Limited from Laing O'Rourke plc,
transferring cash consideration of GBP20.0m from the Group's
existing cash balances.
The acquisition of this UK-based business manufacturing precast
concrete products, provides a unique and immediate opportunity for
the Group to take a leadership position in this market whilst also
expanding its currently capacity-constrained precast business.
Details of the provisional fair value of identifiable assets and
liabilities acquired, consideration transferred, goodwill and
intangible assets are as follows:
Fair value of assets and liabilities acquired
2017
GBPm
------------------------------------------------------ -----
Non-current assets
Intangible assets 0.4
Property, plant and equipment 19.7
Property, plant and equipment - decommissioning asset 0.3
Current assets
Inventories 0.3
Non-current liabilities
Provision for decommissioning (0.3)
Deferred tax (1.2)
------------------------------------------------------ -----
Net assets acquired 19.2
------------------------------------------------------ -----
Consideration transferred
The trade and certain assets of Bison Manufacturing Limited were
acquired on 7 September 2017 for cash consideration of
GBP20.0m.
Transaction costs amounting to GBP0.2m have been recognised as
an expense in the current year, appearing within administrative
expenses.
Goodwill arising on acquisition
GBPm
---------------------------------------------------- ------
Cash consideration transferred 20.0
Less fair value of net identifiable assets acquired (19.2)
---------------------------------------------------- ------
Goodwill 0.8
---------------------------------------------------- ------
None of the goodwill arising on the acquisition is expected to
be deductible for tax purposes. This goodwill is attributable to
the capacity increases and economies of scale the Group expects to
benefit from. Goodwill is allocated to the Bison Precast CGU within
the Bespoke Products segment.
Intangible assets
An intangible asset of GBP0.4m in relation to the 'Bison' brand
name has been recognised on acquisition.
Impact of the acquisition on the results of the group
Following acquisition, the acquired trade and certain assets
were integrated with the Group's other precast operations and
managed as one business. Therefore, post-acquisition figures have
been estimated and do not reflect the synergies across the Group as
a result of the Bison acquisition.
Management have estimated that incremental revenues and
operating profit attributable to the trade and certain assets
acquired are GBP5.8m and GBP0.1m respectively.
Management have not made such an estimate for the period from
1st January 2017 to the acquisition date as the business was
embedded in the operations of the seller and incurring a number of
cross-company charges.
11 Related party transactions
Transactions with related parties
2017 2016
GBPm GBPm
---------------------------------------------- ----- ------
Purchases from related parties (1.0) (3.6)
Interest charged on shareholder loan note - (10.2)
Dividends paid to related parties - (2.6)
---------------------------------------------- ----- ------
Year end balances with related parties
2017 2016
GBPm GBPm
---------------------------------------------- ----- ------
Trade and other payables with related parties - (0.7)
---------------------------------------------- ----- ------
The Group was under the control of Lone Star Funds and its
affiliates up until 25 April 2017. On this date, Lone Star Funds
completed the sell-down of its shareholding and Forterra plc was no
longer under the control of an ultimate controlling party.
Up to 25 April 2017, related parties were entities under common
ownership of Lone Star Funds. All related party transactions and
balances were undertaken in the normal course of business and on an
arm's length basis.
Transactions with key management personnel
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group. The Directors of the Company and the
Directors of the Group's subsidiary companies fall within this
category.
2017 2016
GBPm GBPm
-------------------------------------- ----- -----
Emoluments including taxable benefits (2.6) (2.8)
Share-based payments (0.5) (0.2)
Pension costs (0.2) (0.2)
-------------------------------------- ----- -----
(3.3) (3.2)
-------------------------------------- ----- -----
Information relating to Directors' emoluments, pension
entitlements, share options and long-term incentive plans is
included in the Annual Report to be published in April 2018.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFFDVRIVLIT
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