Forterra Regulatory News (FORT)

26 January 2022

FORTERRA PLC

Pre-close trading update

Strong end to the year; commencement of £40m share buyback programme

Forterra plc (the 'Group' or the 'Company'), a leading UK producer of manufactured masonry products, provides this trading update for the year ended 31 December 2021.

Headlines:

· Strong trading continued to the year end with FY21 results in line with our expectations

· Continued strong operating cashflow with liquidity position better than expected

· Strategic growth projects at Desford and Wilnecote progressing according to plan

· In line with our capital allocation policy, £40m share buyback programme commencing today, with year end cash ahead of expectations

Trading:

· The strong trading across all key market segments seen through 2021 continued to the end of the year. Full year brick sales volumes were 33% ahead of 2020 and 1% ahead of 2019. Brick sales volumes in the second half of the year were 5% ahead of the 2019 comparative. Similar variances were seen in our other core products

· Full year revenue is expected to total approximately £370m (2020: £291.9m, 2019: £380.0m) a 27% increase on 2020 and a 3% reduction relative to 2019. Performance against the 2019 comparative reflects the closure of the precast concrete factory and resulting reduction of output in Bespoke Products. Brick and Block revenues increased by 7% on the 2019 comparative

· Significant double digit price selling increases delivered across key products in late 2021 / January 2022 with management continuing to review the cost landscape before determining when further price increases will be applied

· Cost inflation impacted results for the year with significant cost increases seen in a wide range of categories through the year with the sudden increase in energy costs seen in the final quarter. Approximately 70% of 2022 energy requirements are now secured with greatest coverage in winter months where volatility has been historically greatest

· Our expectations for FY21 remain unchanged with the benefit of greater than expected sales volumes offset by the effects of cost inflation

· The Board intends to issue FY21 results announcement on 10 March 2022

Strategic Investment:

· Desford and Wilnecote brick factory expansion projects continue to progress in accordance with timetable and budget, with commissioning of Desford, which will ultimately increase our installed brick production capacity by 16%, expected in Q4 2022. Equipment contracts now signed for Wilnecote with commissioning expected in Q2 2023

Share Buyback Programme:

· Forterra today announces that it is commencing a share buyback programme (the 'Programme') to repurchase ordinary shares of 1 pence each in the capital of the Company ('Ordinary Shares')

· The Group continues to be highly cash generative with a strong liquidity position that provides considerable financial flexibility. Consistent with our capital allocation policy, communicated at the time of our 2021 half year results, the Board considers that it is returning a prudent level of cash to shareholders, which reflects the strong cash generative ability of the Group, while also retaining a strong balance sheet

· The strong cashflow generation is evidenced by a closing liquidity position exceeding expectations with reported net cash before IFRS16 lease liabilities of approximately £40m (2020: £16.0m). This position also benefited from the sale of the Swadlincote site in the second half of the year

· The aggregate purchase price of all Ordinary Shares acquired under the first tranche of this Programme will be no more than £40 million (excluding stamp duty and expenses). Any Ordinary Shares purchased by the Company will be cancelled

· This return of capital is in addition to our previously communicated plans to invest in excess of £200m in organic growth projects over the next decade, whilst retaining the flexibility to deliver appropriate bolt on acquisitions should opportunities arise

· In advance of moving into a close period ahead of the FY21 full year results announcement, the Company intends to enter into an irrevocable commitment with Numis Securities Limited to undertake the Programme through a non-discretionary programme repurchasing Ordinary Shares within certain pre-set parameters

· Share purchases will take place in open market transactions and may be made from time to time depending on market conditions, share price and trading volume. The maximum price paid per Ordinary Share will be no more than the higher of (i) 105 per cent of the average of the middle market closing prices of the Ordinary Shares for the five business days preceding any Ordinary Shares being purchased and (ii) the higher of the price of the last independent trade and the highest independent bid for Ordinary Shares on the trading venue where the purchase is carried out

· This announcement does not impact the ongoing purchase of Ordinary Shares by the Forterra Employee Benefit Trust (the 'Trust') which is currently purchasing 400,000 Ordinary Shares per month until further notice. These shares will ultimately be used by the Trust for the settlement of awards granted under the Company's employee share schemes, namely the Performance Share Plan (PSP), the Deferred Annual Bonus Plan (DABP) and the Sharesave Plan (SAYE)

· The Programme is in accordance with Forterra's general authority to purchase a maximum of 22,864,719 Ordinary Shares, granted by its shareholders at the Annual General Meeting held on 18 May 2021 and the purpose of the Programme is to reduce the share capital of the Company. Assuming that the applicable buyback authority is renewed at this year's Annual General Meeting the Programme will run until 31 December 2022. The Programme will be effected within the parameters of the Market Abuse Regulation 596/2014/EU and the Commission Delegated Regulation 2016/1052/EU (as in force in the UK from time to time, including where relevant pursuant to the Market Abuse (Amendment) (EU Exit) Regulations 2019). The Group confirms that it currently has no other unpublished price sensitive information. Any extension of the Programme beyond 31 December 2022 will be announced separately and in due course.

· Forterra will announce any market repurchases of Ordinary Shares no later than 7.30 a.m. on the business day following the calendar day on which the repurchase occurred

Stephen Harrison, Chief Executive of Forterra plc commented:

"The strong customer demand seen through 2021 continued up to the end of the year, with 2022 trading continuing where 2021 ended. Having successfully delivered sizeable price increases across our product ranges we are confident of delivering meaningful growth in 2022. We remain watchful of further inflationary cost pressures, and we will apply further price increases as necessary.

"The continued strength of demand for our products bodes well, with customers already keen to secure supply ahead of the commissioning of our new brick factory at Desford later this year. We expect 2022 will be an important year as we prepare for a step change in output and financial performance from early 2023.

"Today's announcement of a share buyback programme to return £40m to our shareholders is in addition to our previously announced decision to increase our dividend distributions to 55% of earnings. This is a sign of confidence in the business and demonstrates our ability to deliver attractive returns to shareholders whilst still investing for the future.

"We are confident that our growth strategy will deliver long term shareholder value. Underpinned by the strength of our cash generation we will continue to invest in new highly efficient and sustainable manufacturing capacity, as we benefit from the shortage of quality housing in the UK and the constrained UK manufacturing capacity for the products needed to increase housing supply."

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) No 596/2014.

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