Forterra Regulatory News (FORT)

10th March 2022

Forterra plc

Strong 2021 results; upgraded guidance highlighting benefits of the new Desford brick factory

¹Exceptional items are disclosed separately where management believes it is necessary to show an alternative measure of performance in presenting the financial results of the Group. Presenting these measures allows a consistent comparison with prior periods.

OPERATIONAL AND TRADING HIGHLIGHTS

· Strong trading throughout the year with FY21 results slightly ahead of market expectations

· Full year brick sales volumes 33% ahead of 2020 and 1% ahead of 2019

· H2 cost inflation not fully recovered in the short-term leading to margin decline relative to 2019; significant (double-digit) selling price increases delivered by 1 January 2022 with further double-digit price increases effective 1 April 2022

· Continued strength of operating cash flow drives strong liquidity position; with closing net cash of £40.9m before leases

ORGANIC INVESTMENT

· Construction of new Desford brick factory remains on track with commissioning due end 2022

· New Desford brick factory now expected to deliver a 22% effective increase in brick production output from 2025; anticipated incremental EBITDA increased to c£25m from c£15m. This increase primarily driven by the reduced performance of the old factory as well as the benefit of increased selling prices

· £27m Wilnecote brick factory refurbishment proceeding according to plan, with main contractor appointed

· Announcement of a highly cost-effective £12m investment to manufacture clay brick slips at Accrington factory

· Sector-leading investment in renewable energy generation through a Power Purchase Agreement (PPA) with a c£50m commitment over 15 years securing around 70% of our electricity requirement from a dedicated Forterra solar farm

CAPITAL ALLOCATION

· Capital allocation policy structured to maximise shareholder value

· Attractive pipeline of organic investment projects in place each offering compelling returns

· Progressive dividend policy with payout ratio of 55% of earnings recommending final dividend of 6.7p bringing total 2021 dividend to 9.9p

· Leverage target at or below 1x EBITDA

· £40m share buyback programme commenced in January 2022 with £5.5m returned to date

· Balance sheet flexibility allows opportunistic bolt on acquisitions

OUTLOOK

· Market conditions remain highly supportive with continued demand for new housing and constrained UK manufacturing capacity driving brick imports to record levels, despite increasing macro-economic uncertainty and supply chain pressures which have created a higher interest rate environment

· Order books remain strong, supported by robust customer sentiment and an ongoing housing shortage

· Selling price increases leave business well placed to recover cost inflation and benefit margins

· Approximately 70% of 2022 energy requirements secured with greatest coverage in winter months where volatility has been historically greatest

· Management expects the Group to achieve further progress in the coming year and beyond

Stephen Harrison Chief Executive Officer commented:

"We delivered a good financial performance in 2021, with strong trading throughout the year and full year results slightly ahead of expectations.

Our markets continued to recover from the effects of the pandemic, with our brick sales volumes similar to 2019 and further growth only limited by production capacity and available inventory.

We continued our programme of organic investment, with the construction of our new Desford brick factory remaining on track for commissioning at the end of this year, our Wilnecote refurbishment proceeding to plan; and new investments in Accrington and solar power generation announced today. We remain disciplined in our capital allocation and have maintained our progressive dividend policy whilst commencing a share buy-back programme and retaining balance sheet flexibility for bolt-on acquisitions.

Our order book remains strong and, although inflationary pressures continue, we remain confident of recovering these through selling price increases.

We remain watchful as to the impacts of increasing macro uncertainty and supply chain pressures as well as increases in interest rates. Approximately 70% of the Group's 2022 energy requirements have been secured.

With market conditions remaining highly supportive, and Desford now expected to deliver a 22% effective increase in brick production and increased incremental EBITDA of £25m from 2025, we are confident that the Group will achieve further progress in the coming year and beyond".

ENQUIRIES

Forterra plc +44 1604 707 600

Stephen Harrison, Chief Executive Officer

Ben Guyatt, Chief Financial Officer

FTI Consulting +44 203 727 1340

Richard Mountain / Nick Hasell

A presentation for analysts will be held today, 10 March 2022, at 8.30am. A video webcast of the presentation will be available on the Investors section of our website (http://forterraplc.co.uk/).

ABOUT FORTERRA PLC

Forterra is a leading UK manufacturer of essential clay and concrete building products, with a unique combination of strong market positions in clay bricks, concrete blocks and precast concrete flooring. Our heritage dates back for many decades and the durability, longevity and inherent sustainability of our products is evident in the construction of buildings that last for generations; wherever you are in Britain, you won't be far from a building with a Forterra product within its fabric.

Our clay brick business combines our extensive secure mineral reserves with modern and efficient high-volume manufacturing processes to produce large quantities of extruded and soft mud bricks, primarily for the new build housing market. We are also the sole manufacturer of the iconic Fletton brick, sold under the London Brick brand, used in the original construction of nearly a quarter of England's housing stock and today used extensively by homeowners carrying out extension or improvement work. Within our concrete blocks business, we are one of the leading producers of aircrete and aggregate blocks, the former being sold under one of the sector's principal brands of Thermalite. Our precast concrete products are sold under the established Bison Precast brand, and are utilised in a wide spectrum of applications, from new build housing to commercial and infrastructure.

Introduction

2021 proved to be a very different year to 2020, although one that brought with it many new challenges. Despite this, we were pleased to see that the strong recovery in our markets, which began in the summer of 2020, continued unabated through 2021.

The ongoing Covid-19 pandemic and associated lockdown restrictions which persisted through much of the first half of the year had little impact on our results but did continue to influence the way we managed the business, with the safety and welfare of our employees remaining paramount.

Supply chain pressures mounted through the year with shortages experienced across several key inputs, along with growing cost inflation, which in the case of energy prices reached unprecedented levels in the final quarter.

Our Markets

Our markets recovered strongly from the effects of the pandemic with UK clay brick demand now similar to 2019 levels. Total clay brick consumption in 2021 is estimated at 2.4bn bricks, of which 422m were satisfied by imports due to a continuing shortfall in domestic production capacity.

UK housebuilding continues to fall short of Government targets with around 198,500 new build homes estimated to have been completed in Great Britain during 2021 compared to the UK target of 300,000. As demand for high quality homes continues to exceed supply and house prices continue to rise, this creates a supportive environment for the recovery of our own cost increases.

Despite recent and ongoing investments, the UK brick market presently lacks the capacity required to meet demand, with domestic production capacity of c2.1bn clay bricks per annum still lower than the pre-financial crisis figure of 2.6bn. Brick imports to the UK increased in 2021 to a record high of 422m bricks, which equates to around 19% of market demand in 2021, with this figure higher still towards the end of the year.

The number of imported bricks increased by 6% relative to 2019 with evidence that imports are now being transported greater distances, at even greater cost, as supplies in nearby continental Europe tighten. We know our customers would rather buy British where possible because we can ensure provenance and quality, we can supply from stock which is available for prompt delivery, and there are shorter transport distances than purchasing imported product. The UK's island geography, combined with similar cost bases in Europe, also provides an economic barrier to entry with the increasing cost of transportation ensuring that imported products continue to sit at a significant cost disadvantage to those manufactured domestically.

These market dynamics leave us ideally placed to substitute imports with production from our new factory at Desford which, upon commissioning at the end of 2022, we believe will be the largest brick factory in Europe offering market leading efficiency. The housebuilding sector's present reliance on imported products also provides an incentive for further investment in domestic production capacity.

Results for the year

¹Exceptional items are disclosed separately where management believes it is necessary to show an alternative measure of performance in presenting the financial results of the Group. Presenting these measures allows a consistent comparison with prior periods.

Our revenues show a strong recovery relative to 2020, which was adversely affected by the impacts of the initial Covid-19 lockdown. Total revenue of £370.4m represents an increase of £78.5m (26.9%) on the prior year (£291.9m) and more meaningfully a decrease of £9.6m on 2019 (£380.0m).

Brick and Block revenues of £298.1m, represent an increase of 33.6% on the prior year comparative (£223.1m) and an increase of £19.0m on 2019 (£279.1m). This is reflective of the strong market demand throughout the year, with production capacity and available inventory being the limiting factors to further growth upon 2019.

Bespoke Products revenues of £76.1m represent an increase of 6.1% on the prior year (£71.7m) and a decrease of 26.5% on 2019 (£103.5m), this decrease primarily being driven by the restructure of the Bison business, with the Swadlincote hollowcore factory closing in mid-2020 and the co-located bespoke precast manufacturing factory closing in late 2021. This rationalisation of capacity allows us to pursue a strategy of maximising the profitability of this segment, focusing on margin improvement as opposed to volume.

Operations

With the exception of our current Desford brick factory and the Swadlincote precast concrete factory, our facilities generally operated at close to capacity during the year. We ended 2020 with very low levels of inventory and with demand consistently strong throughout 2021, there was no opportunity for replenishment. As a result, inventory levels remained extremely low throughout the year. Whilst the inventory value of £32.8m is very similar to the prior year (£33.0m), this is driven by an increase in the valuation of inventories following the significant increase in production costs during the year with quantities on hand further reducing in 2021. Industry statistics show that the UK brick industry held less than two months stock at the end of 2021.

Operating Costs

At the beginning of 2021 cost inflation was relatively benign although by the second quarter the disruption initially triggered by the pandemic meant supply chains were struggling to cope, and prices began to rise. Initially, inflation was centred upon our Bespoke Products segment with steel prices increasing by over 30% followed by similar increases in the cost of the insulation used in our flooring systems. Cost pressures intensified as the year progressed, with significant and often multiple increases in a range of commodities including cement. Transport availability also became constrained, threatening the delivery of key raw materials and pushing up the cost of delivering our own products to customers. With clay being the largest raw material input, most of which is sourced internally from own quarries, our brick business was initially insulated from the worst inflationary pressures until significant increases were seen in energy prices in the final quarter.

Energy Procurement

Our factories are significant consumers of energy with an annual combined spend on natural gas and electricity approaching £30m under normal circumstances. We take a risk-based approach to energy procurement and manage our exposure to market fluctuations through forward purchasing a portion of our requirements, sometimes years in advance. Traditionally our forward purchasing is weighted towards the winter months when energy costs are normally highest and most volatile.

We entered 2021 with around 60% of our gas and the majority of our electricity requirement for the year forward purchased at competitive prices. At this point energy prices remained low, due to the pandemic driven economic uncertainty. With continuity uncertainty as to whether the ongoing pandemic would further disrupt our demand for energy a cautious approach to committing to further purchases was adopted following the £2.5m loss incurred in exiting energy contracts in 2020 at the height of the pandemic. Energy prices began to rise in the summer, and the sudden sharp increase seen in the autumn was unprecedented. With prices rising to around four times historic norms, the increased cost to the business in 2021 is approximately £8.4m. As explained in more detail below, we have recently entered into an agreement to secure around 70% of our electricity requirement from a dedicated solar farm from 2025, enhancing our sustainability credentials and providing long-term price certainty.

Earnings before interest, tax, depreciation and amortisation (EBITDA) 

Earnings before interest, tax, depreciation and amortisation (EBITDA) as stated before exceptional items was £70.4m (2020: £37.9m, 2019: £82.7m) with the prior year being impacted by the pandemic. Brick and Block EBITDA before exceptional items was £70.5m (2020: £40.3m, 2019: £80.4m) and Bespoke Products a loss of £0.1m (2020: loss of £2.4m, 2019: profit of £2.3m).

Our business is managed as two divisions and we allocate our central overheads to each division based on an historic revenue driven mechanism, with central overheads allocated to Bricks and Blocks and Bespoke Products in the ratio 80%:20% respectively. In practice, the allocation of overheads to Bespoke Products exceeds the level of overheads that are directly applicable to this segment, such that if this segment was to be discontinued or divested then the saving of overheads would in reality be modest. Accordingly, we are now disclosing the allocation of central overheads to give greater visibility on the profitability of our segments, in particular Bespoke Products, demonstrating that this segment delivers a meaningful EBITDA contribution whilst utilising a low level of capital employed.

Recognising 2020 was heavily impacted by Covid-19, EBITDA before exceptional items for the year of £70.4m compares to a 2019 comparative of £82.7m, with margins impacted by cost inflation, which in the short-term was not recovered. This is shown in the bridge below which demonstrates that with sales volumes returning to 2019 levels, once the impact of short-term unrecovered cost inflation is taken into account along with other identifiable variances, the result delivered is comparable to 2019. In addition, the 2021 result was impacted by operational issues at the old Desford factory which is expected to close at the end of 2022, as well as a significant increase in the bonuses due to salaried staff relative to 2019, driven by achievement of financial targets, resulting in a bonus and share based payment charge £4.9m greater than 2019. All salaried staff, totalling over 400 individuals, participate in the annual bonus plan.

During 2021 we sold an exhausted former quarry for proceeds of £0.1m. Although the proceeds were modest, this sale relieved the Group of its associated restoration obligations facilitating a release of £1.4m from the restoration and decommissioning provision recognising a profit on disposal of £1.5m which is included within other operating income.

EBITDA (Before Exceptional Items) 2019 to 2021 Bridge

Unrecovered cost inflation in the above totals £9.8m.

Profit before tax stated before exceptional items totalled £50.7m (2020: £17.4m; 2019: £62.5m).

BRICKS AND BLOCKS

We have a unique combination of strong market positions in both clay brick and concrete blocks.

We are also the only manufacturer of the iconic and original 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. We operate nine brick manufacturing facilities across the country with a total installed production capacity of 590 million bricks per annum. We are also a leader nationally in the aircrete block market, operating Thermalite block facilities at Newbury and Hams Hall (Warwickshire). Our aggregate block product has a leading position in the important South East and East of England markets, with well-located manufacturing facilities at Milton (Oxfordshire) and Whittlesey (Cambridgeshire).

This segment also includes Formpave, the Group's concrete block paving business. Based at Coleford in Gloucestershire, Formpave manufactures a wide range of high-quality concrete block paving to suit all projects from commercial to domestic applications, including the patented Aquaflow sustainable drainage system.

TRADING AND RESULTS

The performance of the Brick and Block segment is characterised by strong demand and increasing costs. Brick and Block sales revenues were £298.1m, an increase of 33.6% on the prior year comparative (2020: £223.1m) and an increase of 6.8% on 2019 (2019: £279.1m). Sales volumes were well ahead of 2020 and slightly ahead of 2019, with production capacity and available inventory being the primary constraint, as market demand exceeded our ability to supply.

With demand remaining strong throughout the year and having commenced the year with minimal levels of inventory, our greatest challenge was meeting our customers' expectations. The year saw consistently strong demand from our housebuilding customers, with our initial concerns around the impact of the end of the stamp duty holiday on consumer demand proving unfounded. Repair, maintenance and improvement driven demand from our distributor customer base was also robust.

Accordingly, as a result of the above, segmental EBITDA as stated before exceptional items, totalled £70.5m (2020: £40.3m) with the EBITDA margin of 23.6% representing a significant improvement on the prior year (2020: 18.1%) although falling short of 2019 margin of 28.8%, primarily as a result of rapidly increasing costs in the second half of the year, which in the short term have not been recovered.

Operating Costs

Inflationary pressures in this segment were first felt in our blocks businesses where we have the highest level of externally purchased raw materials, with the price of cement increasing significantly. Inflation was also seen across a wide range of categories as shortages of transport and rising fuel costs pushed distribution costs upwards, along with increases in the cost of packaging and many other categories. The biggest driver, however, came from energy costs whereby, despite benefitting from our forward purchasing to limit price volatility, we, along with much of the wider economy, faced a sudden unprecedented increase in energy costs in the final quarter. In addition, the price of carbon credits which we are required to purchase under the UK Emissions Trading Scheme also increased markedly.

Operating costs were also adversely impacted by low productivity at the old Desford factory which is nearing the end of its life and expected to close at the end of 2022. A significant kiln related breakdown in the first half of the year led to a loss of operating efficiency and, whilst the factory operated more reliably in the second half the year, the output of the was still some way below its design capacity.

Pricing

Whilst the cost inflation experienced during the year was unwelcome, we believe we are ultimately well placed to pass on the increases in our cost base. Our pricing arrangements with customers vary by product, although many of our arrangements until now have been annual in nature. Due to the sudden and unexpected increase in costs seen in 2021 we have not fully recovered our cost inflation in the very short-term, although we remain confident of progressively recovering costs and positively influencing margins. Given the significant cost inflation seen in the raw materials required to manufacture our concrete products we increased the prices of our aggregate blocks in both the spring and autumn and we increased our Thermalite prices by 16.0% in the autumn.

With most of the raw materials sourced internally, our brick business was somewhat insulated from the worst inflationary pressures until the energy prices increased suddenly in the autumn. We elected not to further increase our brick prices in 2021, honouring our previous agreements with customers although we were successful in securing price increases of 16.5% from 1 January 2022 for the significant majority of our customers.

The current cost environment requires us to be agile in our customer pricing and for 2022 we have amended our trading agreements to remove any commitment to annual pricing and also reduced our obligation to give three months' notice of price increases down to one month, allowing greater agility in our pricing in the face of an uncertain cost environment. We have recently announced further double-digit price increases to take effect from 1 April 2022.

Bespoke products

Our Bespoke Products segment focuses on specification-led, made-to-order products comprising both precast concrete and chimney and roofing solutions, much of which is customised to meet the customer's specific needs.

Precast concrete products are designed, manufactured and shipped nationwide under the Bison Precast brand from two facilities situated in the Midlands. Our Red Bank range of terracotta and concrete chimney and roofing products are made at a single facility alongside our highly efficient brick factory at Measham. Our products include:

· beam and block flooring including Jetfloor, which was the UK's first suspended ground floor system to use expanded polystyrene blocks combined with a structural concrete topping to provide high levels of thermal insulation;

· hollowcore floors alongside associated staircases and landings which are used for upper floors of multi-family and commercial developments, with the majority of floors fitted by our in-house installations team;

· structural precast components including precast concrete walls used in applications such as hotels and prisons, and concrete beams used in the construction of building frames as well as stadia components;

· architectural precast concrete façades, in a variety of finishes including brick facings; and

· Red Bank chimney pots, flue systems, ridge tiles and air bricks.

Restructuring

The largest component of the Bespoke Products segment is the Bison Precast concrete products business. Bison Flooring which manufactures precast concrete flooring systems and Bison Precast which manufactures a range of bespoke precast concrete products including walls and façades.

Following the mothballing of the hollowcore factory at Swadlincote in 2020 in response to the impacts of the pandemic, in 2021 we regrettably took the decision to also close the bespoke precast concrete manufacturing facility co-located on the same site and subsequently sell the entire site. This sale returns this segment to the same footprint it occupied in 2017 prior to the Bison acquisition.

The business case for the Bison acquisition was that of a turn-around predicated on increasing the utilisation of the Swadlincote facility. Unfortunately, the market for a number of the precast concrete products manufactured at Swadlincote was materially impacted by the pandemic and even before this, margins across the sector had been declining for several years; something that was not anticipated at the time of the acquisition. In 2020 the decision was taken to refocus flooring production at the Hoveringham site, reducing capacity and sales volumes but increasing margins through a focus on more attractive customer segments. Aligned to the decision to sell the Swadlincote facility, we decided to focus bespoke precast concrete production at a single site, Somercotes in Derbyshire, with our strategy again driven by the manufacture of smaller quantities of differentiated, higher value façade solutions over commoditised grey concrete.

At the time of acquisition, we always recognised that the risks associated with returning a loss-making asset to profitability could, at least in part, be mitigated by the fact that the factory was located on a valuable and marketable piece of land. During the year, we sold the entire site and associated equipment for gross proceeds of £14.7m, recovering a large portion of our original purchase consideration of £20m and realising a profit of £6.1m after accounting for the costs of closure and redundancy. For completeness, this profit recognised in 2021 follows a 2020 impairment loss of £10.2m recognised in respect of the assets and goodwill at Swadlincote. Our precast concrete businesses will continue to trade under the Bison brand.

Trading and Results

Segmental turnover in the year was £76.1m (2020: £71.7m, 2019: £103.5m). Demand for our precast concrete floor beams and the flooring solutions in which they are utilised, recovered strongly in the year, aligned with the recovery of the housebuilding industry. Floor beam sales volumes recovered to 88% of 2019 levels although our output is now constrained by the available production capacity. Hollowcore flooring sales volumes however were intentionally reduced by 53% relative to 2020 and 70% relative to 2019 reflecting our decision to close the Swadlincote facility and focus on maximising margin over volume. Bespoke precast output was also reduced relative to 2020, reflecting the gradual run down of the Swadlincote facility ahead of its closure in November 2021.

Segmental EBITDA, stated before exceptional items, totalled a loss of £0.1m: (2020: loss of £2.4m) after allocation of central overheads totalling £4.9m (2020: £3.6m). Presenting segment results both with and without the overhead allocation demonstrates that the segment continues to deliver a meaningful contribution to Group results.

Operating Costs

The Bespoke Products segment was the first to experience significant cost inflation with steel used for reinforcement of our products along with the insulation used in our flooring systems suddenly rising by around 30%. Like our concrete block businesses, the Bespoke Products segment was also impacted by increases in the cost of other key inputs such as cement and transportation. Such was the level of input cost inflation experienced we needed to increase our selling prices on multiple occasions during the year to ensure operating margins were maintained.

Exceptional Items

Exceptional items total a net profit of £6.1m (2020: loss of £22.8m) and relate solely to the closure and subsequent disposal of the Swadlincote facility. The sale of the facility and associated equipment realised gross sales proceeds of £14.7m, received in cash, generating a profit on disposal of £6.7m. Associated redundancy and termination costs totalling £0.6m have also been recognised within the exceptional item reducing the profit to £6.1m. An exceptional impairment loss of £10.2m was recognised in the prior year in respect of the Swadlincote site and associated goodwill.

Finance Costs

Finance costs totalled £3.3m (2020: £3.4m excluding exceptional financing costs). Under the terms of our credit agreement, which were amended in 2020 as part of our response to the pandemic, interest was charged at a margin of LIBOR +4.00% and subsequently SONIA +4.00% until 31 December 2021. Our interest rate now reverts to a margin grid dependent on leverage with a margin of SONIA plus 1.75% applicable whilst leverage (Net debt / EBITDA, pre IFRS 16) is less than one times, increasing to a margin of 4.00% should leverage exceed 3 times. A commitment fee of 35% of the margin is payable on the unborrowed credit facility.

TAXATION

The effective tax rate (ETR) excluding exceptional items was 21.3% (2020: 18.4%). Inclusive of exceptional items the ETR was 19.8% (2020: 3.8%). The ETR is higher than the UK statutory rate of 19.0% (2020: 19.0%) due to permanent differences, mainly as a result of depreciation on non-qualifying assets, along with the impact of the increase in the UK statutory rate of corporation tax which is to increase to 25% effective from 1 April 2023, the 2021 ETR includes the impact of this rate change on deferred tax, resulting in a charge of £0.8m, adding 1.6% to the ETR.

Excluding the impact of the rate change, the 2021 ETR shows a return to our expected tax rate which tracks around 1% higher than the statutory rate. The 2020 ETR was impacted by the significant fall in profits driven by the pandemic and therefore the permanent adjustments for non-deductible items which had a bigger impact.

Earnings Per Share

Earnings per share (EPS) as stated before exceptional items were 17.5p (2020: 6.6p). Basic EPS after exceptional items was 19.9p (2020: loss of 2.6p) reflecting the exceptional profit on disposal. Earnings per share is calculated on the average number of shares in issue during the year (excluding those held by the Employee Benefit Trust (EBT) which in 2021 was 228.1m shares (2020: 214.8m), the increase being driven by the issue of 26.8m shares in July 2020 which were not fully reflected in the 2020 weighted average.

Dividend

Our dividend policy is that we intend to distribute 55% of our earnings. The decision, announced in 2020, to increase our pay-out ratio from 45% to 55% in 2021 was driven by the strength of our balance sheet, coupled with the Board's confidence in the strength of the Group's ability to generate cash on an ongoing basis. The Board is proposing a final dividend of 6.7p per share (2020: 2.8p) which in addition to the interim dividend of 3.2 pence per share paid in October (2020: nil) will bring the total dividend to 9.9 pence per share (2020: 2.8p).

Subject to approval by shareholders, the final dividend will be paid on 8 July 2022 to shareholders on the register at 17 June 2022.

Cash flow - highlights

Operating cash flow before exceptional items totalled £81.2m compared to £53.9m in 2020 and £64.9m in 2019, a demonstration of the Group's ability to generate consistently strong cash flow and highlighting the quality of earnings in the year.

Payments to the Employee Benefit Trust in the year totalled £5.0m (2020: £1.0m) with payments suspended in 2020 in order to preserve cash in response to the Covid-19 pandemic. Given the strength of our balance sheet, our policy is to provide shares for settlement of our share-based employee remuneration schemes through open market purchases of shares as opposed to the issue of new share capital which would be dilutive.

The new lease liabilities primarily relate to new distribution vehicles as we renew our fleet with the latest efficient and cleaner delivery vehicles.

Capital expenditure

Capital expenditure in the year totalled £34.6m (2020: £24.9m) with strategic capital expenditure totalling £28.9m (2020: £19.5m) and maintenance capital expenditure totalling £5.7m (2020: £5.4m).

Spend on the new Desford brick factory totalled £27.2m bringing the total cumulative project spend to £59.3m with the project still on course to be completed within the £95m budget. We expect £31m of the remaining spend to be incurred in 2022, with the final £5m in 2023.

In addition to the spend on the Desford project, £1.7m was spent on the Wilnecote factory refurbishment project. Spend on this project in 2022 is expected to be approximately £12m with the balance of £13m in 2023.

BORROWINGS AND FACILITIES

At 31 December 2021 net cash (excluding lease liabilities under IFRS 16) was £40.9m (2020: £16.0m). Net cash after deducting lease liabilities of £16.5m was £24.4m. These leases primarily relate to plant and equipment, in particular the fleet of heavy goods vehicles used to deliver products to our customers.

The Group's debt facility comprises a committed revolving credit facility (RCF) of £170m extending to July 2025 with a one-year extension option having been exercised in 2021.

As at 31 December 2021 the facility was undrawn in its entirety, leaving facility headroom of £170m. The Group also benefits from an uncommitted overdraft facility of £10m.

The facility is subject to covenant restrictions of net debt / EBITDA (as measured before IFRS 16) of less than three times and interest cover of greater than four times although a package of bespoke amendments applied until September 2021. The business has traded within these covenants throughout 2021. The facility also includes a restriction prohibiting the declaration or payment of dividends should leverage exceed three times.

Strategy and Capital Allocation

Our strategy can easily be articulated as three pillars that will drive sustained earnings and cashflow growth through:

· Expansion of capacity, enhanced efficiency and sustainability

· Range expansion

· New product innovation

This, along with our capital allocation policy which is centred on delivering compelling returns to shareholders leaves the Group well placed to deliver long term shareholder value.

The Group's capital allocation priorities are summarised as follows:

· Strategic organic capital investment to deliver attractive returns

· Progressive ordinary dividend with the pay-out ratio increasing to 55% of earnings from 2021 onwards

· Acquisitions as suitable opportunities arise in adjacent or complementary markets

· Supplementary shareholder returns as appropriate

Our consistently strong operating cash generation coupled with a strong balance sheet with net cash of £40.9m before leases means the Group ended the year in a strong position. This allows us to deliver our strategy, investing in excess of £200m over the next decade (in addition to Desford) in ambitious organic growth projects, taking advantage of unsatisfied demand for our products whilst at the same time improving our efficiency, and reducing greenhouse gas emissions. Alongside this we have increased our dividend distribution rate whilst also commencing the return of surplus capital to our shareholders, while retaining flexibility to deliver bolt-on acquisitions should attractive opportunities arise.

Organic Capital Investment

The construction of the new Desford brick factory continues to progress according to plan with commissioning expected towards the end of this year. This factory will be the largest and most efficient brick factory in Europe.

When we announced the investment back in 2018 we expected the factory to increase our installed brick manufacturing capacity by 16%. However, with the old factory it will replace struggling to meet its design output and desired levels of efficiency as it reaches the end of its life, the new factory will uplift our actual production output by 22% and is now expected to deliver incremental EBITDA of c£25m in 2025 up from our previous estimate of c£15m. This increase is driven by the deteriorating performance of the old factory as well as selling price increases having a greater beneficial impact due to the operating cost efficiency of the new factory. We expect the increase in EBITDA in 2023 to be approximately £10m, increasing to £17m in 2024. Annual depreciation on the new factory is expected to be approximately £4m.

During 2021 we also announced a £27m investment in our Wilnecote factory, a very different investment to Desford. Wilnecote services the architect-led commercial and specification market which includes residential, commercial, school and hospital developments, a sizeable market of around 400m bricks per annum (approximately 18% of the UK brick demand) and a market segment where Forterra has historically been under-represented. This investment will expand the product range manufactured at the factory providing a degree of diversification reducing our reliance on mainstream housebuilding whilst increasing our total brick production capacity by around 1%. The factory will close in July 2022 for a period of approximately 9 months, recommissioning in the second quarter of 2023 and will ultimately contribute £7m of incremental EBITDA to Group results.

We are also announcing an innovative investment in the manufacture of brick slips, or 'thin bricks' as they are sometimes known. An investment of approximately £12m at our Accrington brick factory will initially facilitate the manufacture of up to 48m brick slips per annum, minimising our investment through utilising an existing factory with only a small reduction in the number of bricks that will continue to be manufactured alongside the new slips. The UK market for brick slips is currently estimated at around 120m units annually with significant growth expected to be driven through growth of the modular construction market along with growing demand for fire-safe façade solutions suitable for use in high rise construction.

Brick slips also offer several sustainability benefits, reducing raw material and energy usage relative to the manufacture of traditional bricks, and with many slips currently being cut from traditional bricks, they can significantly reduce wastage. We expect to be manufacturing brick slips in late 2023 although the ramp up to full production could take a number of years as we grow our market share.

Increased Focus on Innovation

Our strategy for growth requires an increased investment in innovation. Starting in 2022 we will increase our future focused operating expenditure by an additional £2-3m per annum resourcing our business allowing us to enhance our product range, especially in façade solutions where we intend to develop and expand a range of products that will establish firesafe brickwork as a cladding of choice for modular and high-rise buildings.

Share buyback programme

On 26 January 2022 the Board announced the commencement of a share buyback programme to repurchase ordinary shares of 1 pence each in the capital of the Company. The intention is to repurchase and cancel £40m worth of shares through 2022 with this decision taken in line with the Group's capital allocation priorities reflecting the strength of the balance sheet with reported net cash before IFRS 16 lease liabilities of £40.9m and the Board's confidence in the Group and its ongoing strength of cash generation. As at the date of the announcement a sum of £5.5m had already been returned to shareholders.

Sustainability

Sustainability has always been very important to us, as evidenced by our significant achievement of reducing our carbon emissions per tonne of production between 2010 and 2019 by 22%. Since then, we have embedded sustainability at the heart of our business and strategy. In 2021 we further reduced our carbon intensity by a further 4.5% relative to 2019.

It is important to recognise that our products are inherently sustainable, they last for well over a century and require no maintenance throughout their lifetime. The bricks used in an average family home have the same carbon footprint as driving around in an average family car for a year but will provide housing for generations over a period of around 150 years.

Having said that, we are committed to reducing both our carbon footprint and our wider impact on the environment. In doing so we have set challenging targets and intend to reduce our carbon emissions per tonne of output by 32% by 2030 and are committed to achieving net zero by 2050. Today we are delivering large scale investments which will make our business more sustainable whilst also, working in partnership with a number of providers to discover how we can benefit from the game changing emerging technologies of hydrogen and carbon capture and storage.

We are pleased to have recently entered into a 15-year Power Purchase Agreement (PPA) which will see us receive around 70% of our electricity from 2025 from a dedicated solar farm, representing a c£50m commitment to renewable energy over the period of the agreement which will also provide us with price security and stability.

We are committed to transparent disclosure of our sustainability performance and having taken steps last year to early-adopt a number of the requirements of the Task Force on Climate Related Financial Disclosures (TCFD), we have now undertaken the required scenario analysis in order to be fully complaint in the year that this becomes mandatory. Full details of these disclosures and others can be found in our upcoming Annual Report.

Health, Safety and Wellbeing

Health and Safety remains our number one priority with our ultimate goal being that of achieving zero harm. Whilst the pandemic has not adversely impacted our trading in the year it continued to present a number of safety related challenges with additional measures put in place to ensure our workplaces remained safe. We recognise the additional pressures the pandemic has placed on our people and have significantly increased the level of mental health support we are able to offer with 57 colleagues across our business qualifying as mental health first aiders.

In 2021 we increased our focus on behavioural and cultural safety, launching our Road Map to Zero Harm. Following an independent review of the effectiveness of our approach to health and safety completed in early 2020 prior to the pandemic, a follow up review was completed in the year to assess progress against the recommendations. We are pleased to say that the report concluded that progress had been made on the direction of safety strategy and leadership as evidenced by our simplified Golden Rules and the Roadmap to Zero Harm.

Our People

We would like to pass on our sincere thanks to our people who have all worked tirelessly in guiding the business through the challenges faced in the year. Whilst the ongoing pandemic has fortunately had very little impact on our current year results it did significantly impact many of our colleagues and the way they had to work.

The strength of customer demand, coupled with very low inventory levels, alongside substantial supply chain challenges has placed the business and its people under a great deal of pressure and it is pleasing to see how everyone has worked together to meet these challenges head on.

It is also very important to recognise the commitment of the majority of our employees, who did not have the opportunity to work from home and continued to come to work every day in our facilities through the restrictions. Equally, it is also important to acknowledge those who had to spend a large period of time working from home, without valuable face-to-face contact with colleagues, while in many cases again having to balance childcare and home-schooling responsibilities. It was encouraging to see the learnings taken from the previous year and that the investments in improved technology have reaped rewards, with the business able to function efficiently and without interruption throughout the lockdown period.

CORPORATE CULTURE

The Board is aware of its responsibility to foster a corporate culture based upon strong leadership and transparency, ensuring we do business responsibly, adhering to the highest ethical standards, whilst minimising the impact our business has on the environment.

During the year we have continued the open and transparent communication that was so appreciated during the initial lockdown helping all our colleagues better understand the Company's purpose which is to Keep Britain Building.

Health and Safety remains our number one priority and our Roadmap to Zero Harm begins with focussing on behaviours including treating others as family.

SUMMARY AND OUTLOOK

Market conditions remain highly supportive with continued demand for new housing and constrained UK manufacturing capacity driving brick imports to record levels. Order books remain strong supported by robust customer sentiment and an ongoing shortage of quality housing in the UK. Inflationary pressures continue although Management remain confident of recovering cost increases with the Group announcing further double-digit price double increases effective from 1 April 2022 following on from those delivered on or before 1 January 2022.

We remain watchful as to the impacts of wider macro uncertainty and supply chain pressures as well as increases in interest rates. Approximately 70% of the Group's 2022 energy requirements have been secured, with the greatest coverage in the winter months where volatility has been historically greatest.

The construction of the new Desford brick factory remains on track with commissioning due at the end 2022, and the factory now expected to deliver a 22% effective increase in brick production and increased incremental EBITDA of £25m from 2025. Management therefore expects the Group to achieve further progress in the coming year and beyond.

GOING CONCERN

At the balance sheet date, the cash balance stood at £41.5m with available undrawn borrowings of £170m available in the form of a Revolving Credit Facility (RCF). The Group meets its working capital requirements through these cash reserves and facilities and closely manages working capital to ensure sufficient daily liquidity and prepares financial forecasts under various scenarios to ensure sufficient liquidity over the medium-term. During the year the Group agreed a one year extension to the RCF, which now expires in July 2025.

The Board have elected to return surplus capital to shareholders. On 26 January 2022 the Group announced it was commencing a share buyback programme to repurchase ordinary shares of 1p each in the capital of the Company, the aggregate purchase price of the shares is expected to be £40m with this cash outflow occurring in 2022. The decision to undertake the share buyback was taken based on a detailed consideration of the capital requirements of the Group along with the current liquidity position and expected future cash generation. The Board considers it is returning a prudent level of cash to shareholders which reflects the strong cash generative ability of the Group.

The Group have modelled financial scenarios for the period to 31 March 2023, reflecting both macroeconomic and industry-specific projections. These have been modelled as a base case, and two severe but plausible downside scenarios. Each scenario is tested to determine if there is a cash shortfall or there are covenant breaches at each forthcoming covenant test date review. The severe but plausible downside scenarios reflect a downturn in market demand in one scenario and an increase in variable costs in the other scenario.

Scenarios were modelled over the period to 31 March 2023 (going concern review period) to support the going concern assessment. In all the scenarios modelled, and considering mitigative actions available, the Group had headroom in both its banking covenants and existing bank facilities.

With manufacturing operations continuing at capacity since fully reopening in summer 2020, the recovery to date has been sustained, and as such Management are confident that i) the severe but plausible scenarios are unlikely and ii) the mitigations in the form of cost reduction, reducing or delaying capital expenditure and a reduction or curtailment in the quantum of either dividend distributions or the execution of the share buyback that could be applied in such a scenario would see the Group remain resilient.

Taking account of all reasonably possible changes in trading performance, the current financial position of the Group, the post balance sheet share buyback and the mitigations available the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the going concern period to 31 March 2023. The Group therefore adopts the going concern basis in preparing these preliminary financial statements.

FORWARD LOOKING STATEMENTS

Certain statements in this announcement 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.

DIRECTORS' RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

· the Consolidated Financial Statements of the Group, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and UK-adopted international accounting standards give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

· the announcement includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

Stephen Harrison Ben Guyatt

Chief Executive Officer Chief Financial Officer

10 March 2022

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

NOTES TO THE FINANCIAL STATEMENTS

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 and its subsidiaries is 5 Grange Park Court, Roman Way, Northampton, NN4 5EA. The Company is the parent of Forterra Holdings Limited and Forterra Building Products Limited, which together comprise 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.

The preliminary results for the year ended 31 December 2021 have been extracted from the audited consolidated financial statements, which were approved by the Board of Directors on 10 March 2022. The audited consolidated financial statements have not yet been delivered to the Registrar of Companies but are expected to be published in April 2022. 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 UK-adopted international accounting standards. 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).

The financial information set out in this announcement does not constitute the statutory accounts for the Group within the meaning of Sections 434 to 436 of the Companies Act 2006 and is an abridged version of the Consolidated Financial Statements for the year ending 31 December 2021. Copies of the Annual Report for the year ended 31 December 2021 will be mailed to those shareholders who have opted to receive them by the end of April 2022 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.

At the balance sheet date, the cash balance stood at £41.5m with available undrawn borrowings of £170m available in the form of a Revolving Credit Facility (RCF). The Group meets its working capital requirements through these cash reserves and facilities and closely manages working capital to ensure sufficient daily liquidity and prepares financial forecasts under various scenarios to ensure sufficient liquidity over the medium-term. During the year the Group agreed a one year extension to the RCF, which now expires in July 2025.

The Board have elected to return surplus capital to shareholders. On 26 January 2022 the Group announced it was commencing a share buyback programme to repurchase ordinary shares of 1p each in the capital of the Company, the aggregate purchase price of the shares is expected to be £40m with this cash outflow occurring in 2022. The decision to undertake the share buyback was taken based on a detailed consideration of the capital requirements of the Group along with the current liquidity position and expected future cash generation. The Board considers it is returning a prudent level of cash to shareholders which reflects the strong cash generative ability of the Group.

The Group have modelled financial scenarios for the period to 31 March 2023, reflecting both macroeconomic and industry-specific projections. These have been modelled as a base case, and two severe but plausible downside scenarios. Each scenario is tested to determine if there is a cash shortfall or there are covenant breaches at each forthcoming covenant test date review. The severe but plausible downside scenarios reflect a downturn in market demand in one scenario and an increase in variable costs in the other scenario.

Scenarios were modelled over the period to 31 March 2023 (going concern review period) to support the going concern assessment. In all the scenarios modelled, and considering mitigative actions available, the Group had headroom in both its banking covenants and existing bank facilities.

With manufacturing operations continuing at capacity since fully reopening in summer 2020, the recovery to date has been sustained, and as such Management are confident that i) the severe but plausible scenarios are unlikely and ii) the mitigations in the form of cost reduction, reducing or delaying capital expenditure and a reduction or curtailment in the quantum of either dividend distributions or the execution of the share buyback that could be applied in such a scenario would see the Group remain resilient.

Taking account of all reasonably possible changes in trading performance, the current financial position of the Group, the post balance sheet share buyback and the mitigations available the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the going concern period to 31 March 2023. The Group therefore adopts the going concern basis in preparing these preliminary financial statements.

New standards, amendments and interpretations

The accounting policies adopted in the preparation of the preliminary financial statements are consistent with those followed in the preparation of the Consolidated Financial Statements for the year ended 31 December 2020, except for the adoption of new standards effective as at 1 January 2021, the impact of which is described below. At the date of approval of these preliminary financial statements there were a number of standards, amendments and interpretations that have been published and are effective for accounting periods beginning on or after 1 January 2022. The Group are currently assessing any potential impact of amendments to IAS 12 (Deferred Tax related to Assets and Liabilities arising from a Single Transaction) however no others are expected to have a material impact on the Group. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

(i) Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). The amendment includes a practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest. The Group has taken advantage of this in transitioning from interest rates calculated using LIBOR to SONIA on its Revolving Credit Facility. The change has not significantly impacted the interest rate payable, with LIBOR and SONIA being regarded as economically equivalent. Further reliefs regarding hedge designation and hedge documentation had no impact on the preliminary financial statements.

3. 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 three operating segments: Bricks, Blocks and Bespoke Products. The principal activity of the operating segments are:

· Bricks: Manufacture and sale of bricks to the construction sector

· Blocks: Manufacture and sale of concrete blocks and permeable block paving 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 processes, suppliers, customers and distribution methods.

The Bespoke Products range includes precast concrete (marketed under the 'Bison Precast' brand), 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, such as 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, are allocated to the segments for reporting purposes using a split of 80% Bricks and Blocks and 20% Bespoke Products. Management considers that this is 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, both dense and lightweight blocks, precast concrete, concrete paving and other complementary building products.

Substantially all revenue recognised in the Consolidated Statement of Total Comprehensive Income arose within the UK.

Property, plant and equipment, intangible assets, right-of-use assets, and inventories are allocated to segments and considered when appraising segment performance. Trade and other receivables, income tax assets and cash and cash equivalents are centrally controlled and unallocated.

Property, plant and equipment, intangible assets, right-of-use assets and inventories are allocated to segments and considered when appraising segment performance. Trade and other receivables and cash and cash equivalents are centrally controlled and unallocated.

In the current year the Group announced the closure of the bespoke precast concrete factory at Swadlincote. This followed the decision made by Management to mothball the hollowcore facility co-located at the site in 2020, the impairment charge for which is recognised as an exceptional item in 2020. Following the announcement of closure, the site was subsequently sold in 2021.

In line with the treatment of the closure of the hollowcore production facility in 2020, the second stage of this site closure and subsequent sale has been disclosed as an exceptional item in 2021. The total recognised gain of £6.1m can be broken down into a profit on sale of the land and buildings and plant and machinery at the site of £6.7m, combined with associated redundancy costs of £0.6m. Within the profit on sale, the Group received gross sales proceeds of £14.7m relating to the sale of the facility and associated equipment.

Restructuring costs totalling £2.4m were incurred in 2020 as a result of changes announced to address the Group's cost base, including both changes to shift patterns and adjustments to the size and structure of support functions.

Following the Covid-19 pandemic Management's immediate priorities were reassessed and a £17.0m impairment was charged against assets in business areas with more challenging market conditions and weaker margins. This fully wrote-down the carrying value of goodwill within the business, wrote down assets associated with hollowcore production at the mothballed facility in Swadlincote and wrote-off an IT system. The Goodwill impairments (£6.8m) substantially related to £6.0m of goodwill that had been recognised on the historic acquisition of Hanson plc by HeidelbergCement AG in 2007 attached to the Formpave site. Formpave following Covid-19 could no longer support a carrying value that included this £6.0m of goodwill.

The remaining £0.8m of goodwill related to the acquisition of the Swadlincote facility in 2017 and was recognised within the Bespoke Products segment. Goodwill of £0.8m was impaired along with a £9.4m impairment relating to idle assets at the Swadlincote facility. There was no value in use for the foreseeable future following the decision to mothball the hollowcore facility in response to the Covid-19 pandemic.

The final £0.8m impairment related to the write down of an IT system following a decision to cease use of and replace this asset. £0.7m of this was shown as an impairment within intangible assets and the remainder within provisions as an onerous contract.

Further to the above, on 7 July 2020 the Group refinanced its existing banking facilities. Costs of £3.4m associated with this refinancing were recognised as an exceptional item.

Exceptional costs incurred by the Group are presented within the following line items in the Consolidated Statement of Comprehensive Income.

The sale of the land and buildings at Swadlincote gave rise to a chargeable gain subject to corporation tax. The redundancy costs incurred are tax deductible.

Restructuring and refinancing costs recognised have been treated as tax deductible. The aborted transaction costs and impairment charges on goodwill, property, plant and equipment and land and buildings are not tax deductible. The property, plant and equipment impairment gives rise to a deferred tax credit such that they are not tax rate impacting, however the impairment of goodwill and non-qualifying land and buildings impact the effective tax rate.

In 2020, the Group drew down on its revolving credit facility in its entirety from mid-March, securing cash in response to the Covid-19 pandemic, but resulting in higher interest charges. At the 31 December 2020, £15.0m remained drawn down under the facility which was repaid in full during 2021. The interest payable as presented in the preliminary financial statements for 2021 relates to the commitment fee charged during the period.

In the March 2021 Budget, the Chancellor of the Exchequer confirmed an increase in the corporation tax rate from 19% to 25% with effect from 1 April 2023. The Finance Bill 2021 had its third reading on 24 May 2021 and is now enacted.

The Directors are proposing a final dividend for 2021 of 6.7p per share, making a total payment for the year of 9.9p (2020:  2.8p). This is subject to approval by the shareholders at the AGM and has not been included as a liability in the preliminary financial statements.

8. Earnings / (loss) per share

The calculation of earnings per ordinary share is based on earnings after tax and the weighted average number of ordinary shares in issue during the year. Earnings per share before exceptional items is presented as an alternative performance measure to provide an additional year-on-year comparison excluding the impact exceptional items as detailed within note 4, and their associated tax impact.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has four types of dilutive potential ordinary shares, being: those share options granted to employees under the Sharesave Scheme where the exercise price is less than the average market price of the Company's ordinary shares during the year; unvested shares granted under the Deferred Annual Bonus Plan; unvested shares granted under the Share Incentive Plan; and unvested shares within the Performance Share Plan that have met the relevant performance conditions at the end of the reporting period.

The Group last refinanced its banking facilities in July 2020 securing a facility size of £170m in place until July 2024 as well as a package of covenant variations extending to September 2021. The facility agreement included the option for the Company to request, subject to bank approval, an additional extension for a further year to July 2025. The extension was approved, with the facility now committed until 1 July 2025. An arrangement fee of £0.3m was paid in respect of this extension which is included within other finance expenses within note 5. The credit agreement has also been amended to remove references to LIBOR with interest now calculated based on SONIA plus a small credit adjustment spread. This change does not significantly impact the interest rate payable.

The facility is secured by fixed charges over the shares of Forterra Building Products Limited and Forterra Holdings Limited.

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.

Information relating to Directors' emoluments, pension entitlements, share options and long-term incentive plans appear in the Annual Report on Remuneration within the Annual Report and Accounts to be published in April 2022.