Forterra Regulatory News (FORT)

15 January 2019

Forterra plc

Trading update

Forterra plc, a leading UK producer of manufactured masonry products, provides this trading update for the year ended 31 December 2018.

Trading in the final quarter of 2018 was good, underpinned by the sustained strength of the new build residential market. Based on this, full year profit before tax is anticipated to be in line with the Board's expectations.

Brick volumes for the year were modestly ahead of 2017, and we were able to meet demand through a double digit increase in output reflecting full year production at the Accrington and Claughton facilities, and the investment made in debottlenecking projects. This increase in output meant that brick inventory levels reduced at a lower rate than in 2017, and there was a better balance between sales and production. Overall block sales volumes were ahead of prior year, with aircrete volumes increasing as the substitution effect of aggregate blocks in 2017 was reversed. Sales of precast concrete products have continued to improve as anticipated, and the integration of the Bison Swadlincote facility has progressed well with a sustained increase in productivity during the last quarter. The kiln repair at the Desford brick plant in Leicestershire was completed before Christmas and production re-commenced.

The Group continues to generate a strong level of operating cashflow, helped in the last quarter by improved working capital arising mainly from collections of receipts from customers. Capital expenditure included an investment of £4.5m made in December 2018 to secure further long-term clay reserves for the London Brick facility. Net debt at 31 December 2018 was approximately £39m compared with £61m at the start of 2018.

The UK brick market has continued to perform well, with high levels of capacity utilisation across the industry due to the sustained increase in new housing output over the last few years. Brick imports have increased to help satisfy demand and now represent over 16% of total UK demand. The overall fundamentals of the market continue to be favourable, supported by the Government's commitment to further increase new housebuilding. In this context, the Group announced in May 2018 a project to build a new brick factory at Desford which will increase our total brick capacity by 16% whilst also reducing the cash cost of production. The application for planning consent for this project is being progressed following submission to the local authority.

Annual results for the financial year ended 31 December 2018 will be announced on 12 March 2019.

Enquiries

Further information relating to the Company and its group can be found at www.forterraplc.co.uk