Forterra plc AGM Trading Update & Brick Capacity Expansion (7795O)
May 22 2018 - 6:43AM
UK Regulatory
TIDMFORT
RNS Number : 7795O
Forterra plc
22 May 2018
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 GBP72.6m
compared with GBP60.8m 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 GBP90-95m. 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 GBP1.5m 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
+44 (0) 1604 707
Forterra plc: 600
Stephen Harrison (CEO)
Shatish Dasani (CFO)
FTI Consulting: +44 (0) 20 3727 1340
Richard Mountain
Nick Hasell
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#
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END
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