Last checked at 6 Apr 2020 14:35
6 April 2020
Ibstock plc ("the Company" or "the Group")
2019 Annual Report and Accounts, Notice of Annual General Meeting 2020 and Further Update on COVID-19 Response
Annual Report & AGM
Further to the release of the Company's preliminary results announcement on 3 March 2020 (the "Results Announcement"), the Company announces that it has today published its full Annual Report and Accounts for the year ended 31 December 2019.
The Company also announces that it will be posting copies of the documents listed below to shareholders later today:
1. | 2019 Annual Report and Accounts |
2. | Notice of Annual General Meeting ("AGM") 2020
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The AGM 2020 will be held at 11:00am on Thursday 21 May 2020 at the offices of Ibstock plc, 54 Hatton Garden, London, EC1N 8HN.
A copy of each of these documents will be submitted to the UK Listing Authority via the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/nsm
The 2019 Annual Report and Accounts and Notice of Annual General Meeting 2020 will also be accessible later today via the Company's website at www.ibstockplc.com/investors
Regretfully, the current issues surrounding COVID-19 and the public health guidance in the UK have meant that we have taken the decision to run this year's AGM as a closed meeting, and shareholders will not be able to attend in person. For the avoidance of doubt this approach does not impact shareholders' ability to vote on the resolutions being proposed and information regarding the voting procedure can be found in the Notice of AGM. As the situation is constantly evolving, any changes to the AGM (including any change to the location) will be communicated to shareholders before the meeting through our website and, where appropriate, by RNS announcement.
The Appendix to this announcement is a supplement to the Results Announcement and should be read together with the Results Announcement. It contains the information required, pursuant to DTR 6.3.5, to be communicated to the media in unedited full text that is in addition to the information communicated in the Results Announcement. This announcement is not a substitute for reading the full Annual Report and Accounts. Page numbers and cross references in the text below refer to page numbers and cross references in the Annual Report and Accounts 2019.
Update on COVID-19 Response
Further to its announcement of 24 March 2020, the Group is providing a further update on its response to the COVID-19 pandemic.
In support of the UK Government's initiatives to bring the pandemic under control, to protect the health and well-being of colleagues and in response to the construction industry backdrop, the orderly shutdown of our manufacturing sites across the UK is now complete. A skeleton staff is in place at the sites during the shutdown period to ensure that safety and security is maintained.
We welcome the action taken by the UK Government to preserve employment and are actively progressing our participation in the job retention scheme as part of our plans to support colleagues through the crisis period. The Group expects to furlough a significant proportion of colleagues during the production shut down period and we are also considering participation in other Government initiatives.
In recognition of the current exceptional circumstances, the entire Board and Executive Leadership Team have taken a voluntary 20% salary reduction for a three-month period commencing 1 April 2020. The situation will be reviewed at the end of this period.
The Directors will not be recommending the payment of the final dividend as announced with the Preliminary Results on 3 March 2020 and as stated in the 2019 Annual Report and Accounts. Accordingly, and as previously announced on 24 March 2020, no dividend resolution is now being proposed in the Notice of AGM and no final dividend will be paid.
Appendix
Principal risks and uncertainties
DESCRIPTION | MITIGATION |
Economic conditions
The Group's business could be materially impacted by changes in the macroeconomic environment in the UK. Specifically, demand for the Group's products is strongly correlated with residential construction and renovation activities and non-residential construction, together with the supply chain's attitude to stock levels, which are cyclical. In addition, should negative impacts on economic conditions arise as a result of the UK's decision to leave the EU, this could include a reduction in housing demand, or reduced mortgage availability or affordability. Such consequences would likely reduce demand for the Group's products.
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Wider macroeconomic conditions are largelybeyond the control of the Group. However, theGroup seeks to analyse construction statistics using independent forecasts of construction statistics and forecasts future demand based on stated customer requirements with the aim of anticipating market movements. The Group has historically flexed capacity and its cost base where possible during economic downturns to allow more of the Group's manufacturing plants to remain open and viable, maintaining skills, development and training. The Group believes this maintained employee morale and high levels of customer service through the last economic downturn. It also allows the Group to respond more rapidly to increases in demand and keep customers satisfied. The Group's RMI and specification product ranges diversify end-use exposure and provide greater resilience in light of changing market demand in any of its end-use markets. Our responses to possible Brexit implications are noted within the "Principal risks and Brexit" summary. Opportunities may arise for the Group given the increased reliance on imported bricks during 2019. |
Government regulation and standards relating to the manufacture and use of building products
The Group's production, manufacturing anddistribution activities are subject to Health and Safety risks. The Group is subject to environmental, health and safety laws and regulations and these may change. These laws and regulations could cause the Group to make modifications to how it manufactures and prices its products. Greater regulation following the Grenfell tragedyhas increased the risk that the Group's failure tocomply with the relevant regulations would result in the Group being liable to fines or a suspension of operations, which would impact the Group's financial results, together with any associated negative reputational damage.
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The Group monitors the law across its markets to ensure the effects of changes are minimised and the Group complies with all applicable laws. The Group aligns Company-wide policies and procedures accordingly with training on mandatory topics and compliance requirements undertaken. The health and wellbeing of our employeesis fundamental to our business. We havestringent Health and Safety policies and monitorcompliance regularly through internal and external auditing activity. We have also invested considerable resourcesin employee training across our manufacturingprocesses. We have invested heavily in safe systems and facilities to protect our employees |
Customer relationships and reputation
The Group receives a significant portion of itsrevenue from key customers and the loss of any such customer through our failure to evolve effectively and meet the changing needs of our customers could result in a significant loss of revenue and cash flow. Constriction in activity levels within the construction industry introduces a risk that price levels cannot be maintained, resulting in dilution of margins or level of market share and adversely Impacting the Group'sfinancial results. Further, the Group does not have long-term contracts with its customers and the Group's revenue could be reduced if its customers switch some or all of their business with the Group to other suppliers or if we are unable to leverage our customer relationships effectively. |
The Group has a service-led ethos with manytop customer relationships lasting over 40 years.The Group differentiates itself through the continued quality of its products and service levels with Net Promoter Score ("NPS") surveys completed to build customer relationships through proactive response to customer requirements. The Group's sales and production teams are highly integrated to ensure that production aligns with customers' needs. Sales teams receive in-depth technical training and are assisted by a design support service team as well as targeted marketing materials to assist with specification and selection. The Group's businesses each have their own sales teams aligned by customer group and region in order to focus on key decision makers and customers. Key account management is supervised at a senior level where long-term relationships benefit from the Group's commitment to quality, service and consistency.
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Operational disruption
A material disruption at one of the Group'smanufacturing facilities or quarries, or at one of the Group's suppliers' facilities, could prevent the Group from meeting customer demand. The Group depends on efficient and uninterrupted operations of its information and communication technology, and any disruption to these operations could have a material adverse effect on the Group's operations and financial performance. Failure to deliver capital enhancements on a timely basis could similarly extend planned closures and adversely impact the Group's production capabilities. Additionally, the Group is exposed to the impactof unexpected or prolonged periods of bad weather, which could adversely affect construction activity and, as a result, demand for the Group's products |
The Group has the ability to transfer some of itsproduction across its network of plants and is able to engage subcontractors to reduce the impact of certain production disruptions. In relation to supplier disruption or failure, further third party suppliers have been identified who can maintain service in the event of a disruption. In relation to IT, a major incident action plan has been developed and the Group maintains data backups and a comprehensive disaster recovery plan covering Group and individual factory locations. The Group maintains a capital expendituredevelopment plan, which is focused on integrating the latest technology and replacing end-of-life assets to ensure continued operational capability. The enhanced maintenance programme announced in July 2018 ensures a disciplined approach to plant outages, whilst ensuring greater investment inmaintenance on an ongoing basis, this is supported by qualified project management resource to ensure disruption is minimised. Management do not underestimate the potentialimpact that future prolonged periods of badweather could have. Weather conditions are beyond the Group's control, although historically adverse weather has not impacted trading in the context of any full year. The Group maintains appropriate businessinterruption insurance, whilst its wide geographical spread mitigates this risk to some extent and allows it to manage its production facilities to mitigate the impact of such disruption. |
Recruitment and retention of key personnel
The Group is dependent on qualified personnel in key positions and employees having special technical knowledge and skills. Any loss of such personnel without timely replacement could disrupt business operations, damage customer relationships or result in the loss of corporate knowledge. There is a risk that the Group faces difficulties inattracting and retaining staff in production roles,which are labour-intensive and potentially lessattractive to the younger population.
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Focused action plans are in place as a result of the 'Great place to work' employee engagement survey aimed at further building on employee satisfaction. Investment in our people through training anddevelopment programmes is in place to upskill our existing workforce whilst we recognise the changing labour markets, and packages for key and senior staff remain competitive. The Group believes that it is essential to supportand develop the management team, whereappropriate, ensuring that the team is structuredin a way which best takes advantage of the available skills and robustly identifies the team and structure for the future. Extensive succession plans are in place, which is key to ensuring a managed transfer of roles and responsibilities. Apprenticeship schemes are in operation witha yearly intake across the business (engineeringand technical based). High potential individualsare identified with development plans formulated. External recruits are brought in where any skill gaps are identified and to enhance the talent pool |
Input prices
The Group's business may be affected by volatility in extraction expenses and raw material costs. Risks exist around our ability to pass on increased costs through price increases to our customers. The Group's business may also be affected byvolatility in energy costs or disruptions in energysupplies. Significant changes in the cost or availability of transportation could affect the Group's results
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Significant input costs are under constant review, with continuous monitoring of raw material costs, energy prices and haulage expenses, with the aim of achieving the best possible prices and assuring stability of supply. With regards to possible energy shortages, the Group operates forward purchasing to mitigate the impact of sudden price increases and monitors the carbon market on an ongoing basis and has modelled the impact of such rises to assess the financial implications (see Viability Statement on page 47). As competitors of the Group are likely to experience similar levels of input price increases, we aim to have appropriate pricing policies to remain competitive within our markets and pass on significant increases in input costs. |
Product quality
The nature of the Group's business may expose it to warranty claims and to claims for product liability, construction defects, project delay, property damage, personal injury and other damages. Ensuring accuracy of the Group's product datais important to the Group's continued success with any inaccurate data potentially placing the end user at risk. Any damage to the Group's brands, includingthrough actual or alleged issues with its products, could harm our business, reputation and the Group's financial results.
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Post-Grenfell tower disaster, the focus on accurate product information has heightened, with the Group's customers demanding greater information regarding the product specifics. The Group operates comprehensive quality control procedures across its sites with both internal and external audit reviews of product quality completed to ensure conformance with internationally recognised standards. All accredited staff undergo rigorous trainingprogrammes on quality and the Group's Technical teams carry out regular testing of all of our products to provide full technical data on our product range. The Group maintains appropriate insurance cover against product liability related claims. |
Financial risk management
In addition to the input cost risks outlined withinrisk 6, the Group is subject to the following otherfinancial risks: - Foreign exchange risk: As the Group transacts in currencies other than Sterling, exchange rate fluctuations may adversely impact the Group's results. - Credit risk: Through its customers, the Groupis exposed to a counterparty risk that accountsreceivable will not be settled leading to a financial loss to the Group. - Liquidity risk: Insufficient funds could result in the Group being unable to fund its operations. - Interest rate risk: Movements in interest rates could adversely impact the Group and result in higher financing payments to service debt. Following disposal of the Group's US subsidiaryduring 2018, the foreign exchange risk withinfinancial risk management has reduced
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Foreign exchange risk: The Group undertakeslimited foreign exchange transactions sellingdomestically with largely local input costs.Some capital expenditure requires foreignexchange purchases and management considers foreign exchange hedging strategies where significant exposures may arise. - Credit risk: Customer credit risk is managedby each subsidiary subject to the Group's policyrelating to customer credit risk management.The Group principally manages credit riskthrough management of customer credit limits.The credit limits are set for each customerbased on the creditworthiness of the customerand the anticipated levels of business activity.These limits are initially determined when thecustomer account is first set up and are regularly monitored thereafter. - Liquidity risk: The Group's policy is to ensurethat it has sufficient funding and facilities inplace to meet any foreseeable peak in borrowing requirements and liabilities when they become due. At 31 December 2019, the Group has net debt of £85 million - well within the banking facilities of £215 million, as set out in Note 19 of the Group financial statements. - Interest rate risk: The Group finances itsoperations through a mixture of retainedprofits and bank borrowings. The Group's bankborrowings, other facilities and deposits are inSterling and at floating rates. No interest ratederivative contracts have been entered into during the year or at the year end. |
Cyber security
High-profile attacks on companies across a number of industry sectors (including one of our own major customers) have highlighted the damage that can now be caused by hackers and cyber terrorists. Unauthorised access to the Group's IT systems, malware attacks or hacking incidents represent the greatest cyber security risks to the Group. Such IT security risks have the ability to significantly disrupt the Group's business, resulting in financial loss. Potential penalties could arise from the loss of data as a result of breaches to the Group's IT security or reputational damage as a result of negativepublicity associated with control lapses in this area.
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The Group is committed to ensure that its network, applications and data are protected. During the past two years, the Group hascompleted a review using an external cyber security programme framework, which provides coverage across the key areas of cyber security and aligns with industry standards. This has culminated in the Group's achievement of the UK Government's Cyber Essentials accreditation, which is subjectto independent audit annually |
Climate change
NEW RISK
The Group may not deliver upon its commitmentto sustainability. An inability to manage energydemand needs within our sustainability targetsor changes in consumer demand may reduceour competitive advantage. Failure to respond to climate change risks may also result in reductions in investor demand. As a business engaged in the extraction of natural resources and the manufacture of concrete products, there is a risk that the Group's operations are targeted by environmental activists. This could result in disruption at one or more of the Group'smanufacturing facilities inhibiting the ability tomanufacture or despatch product or receive supplies. The impact of climate change and Government's response to this could also lead to changes to laws and regulations that could require that the Group make significant capital investments or otherwise increase its costs or could result in material liabilities.
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We recognise the importance of being a sustainable business and that climate change affects natural and economic systems, and recognise their implications in all we do. As a business, there are a number of ISO and BES standards operated throughout our businesses which include environmental, energy, responsible sourcing and quality. These provide a consistent set of procedures which are regularly reviewed and updated to identify ways in which they can be made more effective. The Group aims to provide visibility and assurance to our stakeholders through our disclosure in relation to sustainability (see pages 32 to 33), which is supported by continued investment to improve the sustainability of our operations and internal sustainability KPIs to track measures. The Group has a proven record of investment inthe latest systems, plant, machinery and technology and we continue to address the need for enabling conditions to address climate change concerns through the development of our Sustainability Roadmap 2025. The Group Technical team and Group Engineering function are investing in longer-term strategic supplier partnerships in order to deliver longer-term sustainable products to our customers. We operate proactive management of thesustainability messages associated with the Group's products. Physical security measures are in place at the Group's production facilities, together with real-time monitoring of social media to identify threats of environmental activism.
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Anticipating the market and new product development
NEW RISKThere is a risk that the business is not able to identify opportunities in the housing market or construction sector and miss chances to maximise or exploit opportunities ahead of our competitors. As result, our product offering and the customer journey may not meet changing customer requirements. If the business is not able to respond to changesor opportunities in the market this could result ina direct financial cost whereby revenue numbersstagnate or decline. In addition, there is the risk that the business may not be perceived as market leader and this will directly impact their reputation and ability to expand market share. Failure to be at the forefront of innovation as theGroup's markets evolve may lead to a loss in market position or customers resulting in declining revenue or margins. A lack of new product development and failureto optimise our supply chain to support ourcustomers may also be detrimental to the long-term achievement of the Group's strategy. |
Consideration of relevant market data and trends in the divisions highlights emerging risks as soon as they are identified and providing the leadership teams with the information required to make considered and fact-based decisions. The Group has a culture of innovation throughits organisational structure, including the recentappointment of two new product managers(one in each of the operating divisions). The introduction of the Group's growth enginestrategy to secure sales opportunities will enable more effective new product development. |
Directors' Responsibility Statement
The Directors, whose names and functions are given on pages 54 and 55 of the 2019 Annual Report and Accounts confirm that to the best of their knowledge:
- the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and Company and the undertakings included in the consolidation
taken as a whole;
- the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Group and Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
The Directors consider that the Annual Report and Accounts taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's position and performance, business and strategy.
This Responsibility Statement was approved by the Board of Directors on 2 March 2020 and is signed on its behalf by Joe Hudson, Chief Executive Officer, and Chris McLeish, Chief Financial Officer.
Enquiries to:
Ibstock plc | |
Robert Coates, Investor Relations Director | 07880 486329 |
Citigate Dewe Rogerson | 020 7638 9571 |
Kevin Smith | |
Nick Hayns |
Ibstock plc
About Ibstock Plc
Ibstock plc is a leading manufacturer of clay bricks and a diversified range of clay and concrete products, from its operations in the United Kingdom. Its principal products are clay bricks, brick components, concrete roof tiles, concrete substitutes for stone masonry, concrete fencing and pre‐stressed concrete products.