Ibstock’s full-year revenue fell 10% to £366mn reflecting lower sales volumes, particularly in the first half.
Underlying cash profit (EBITDA) fell 26% to £79mn, impacted by lower revenue and the non-repeat of £15mn of one-off inventory benefits in the prior year.
Underlying free cash flow improved from an outflow of £16mn to an inflow of £11mn, largely due to lower capital expenditure. Net debt rose 21% to £122mn at year-end.
Trading in the early weeks of 2025 has been “solid”, with volumes ahead of the prior year. Ibstock expects to make “good progress” in 2025, with performance weighted to the second half.
A final dividend of 2.5p per share was announced, taking the full-year total to 4.0p (2023: 7.0p).
The shares rose 4.2% in early trading.
Our view
2024 was another tough year for Ibstock as a subdued building market saw revenue and profits fall at double-digit rates. But demand started to improve over the second half, and the group’s optimistic that this momentum will continue throughout 2025.
It’s a tough period for the brickmaker. Elevated mortgage rates have been weighing on housing affordability, causing housebuilders to be conservative about starting new projects. That’s contributed to weak demand for Ibstock’s products, and both volumes and prices are subdued as a result.
That’s not a good combination. Brickmakers like Ibstock typically have high fixed costs as the kilns used to make the bricks require a lot of energy to heat up. If enough revenue isn’t coming in the door, there’s little wiggle room to cover the high fixed costs
Cost cuts are continuing and helping to soften the blow on margins. But cost cuts can only go so far, so the squeeze on margins will remain an issue to grapple with in the near term.
To help keep hold of cash, dividend payments have been trimmed. That’s a prudent move in our view and should provide more of a cushion to combat any further bumps in the road. With major expansion projects now close to completion, there should be lower demand for the group’s cash resources moving forward.
Ibstock has the largest brick-making capacity in the UK. And upgrades to other sites should help lower production costs while also giving room to increase output when needed. That means the group's arguably better placed to benefit from higher demand when it eventually arises.
While it’s still early days, there are signs of increased confidence and activity in the housebuilding market. If expectations of further interest rate cuts through 2025 are met, mortgage affordability should improve slightly and feed through to increased demand for Ibstock’s products.
In order to be ready for this potential uplift, Ibstock’s carefully starting to bring more capacity online. But it’s difficult to map how long it will be before housing market activity really ramps up, and there’s a risk that cash resources and profit margins could get strained if it doesn’t jump back into life quickly enough.
All in, Ibstock still has attractive long-term growth prospects, and the outlook is much brighter than it has been for some time. If earnings growth comes through as expected in the coming years, investors could be rewarded for their patience at the current valuation. But there’s no guarantee that construction activity will take off, so investors should be prepared to stomach some volatility along the way.
Environmental, social and governance (ESG) risk
The construction industry’s ESG risk edges towards the higher end of the spectrum, especially for the Materials sector. Carbon management of company operations and the impact of its products and services is the most acute risk. Other pressing issues are resource use, community relations, labour relations, and bribery and corruption.
According to Sustainalytics, Ibstock’s management of ESG risk is strong.
There is a strong greenhouse gas emission reduction programme in place, and carbon intensity has already declined moderately in recent years. ESG-related issues are integrated into the core business strategy, with management remuneration explicitly linked to sustainability performance targets. Despite this, overall ESG-related disclosures lag behind best practice.
Ibstock key facts
All ratios are sourced from Refinitiv, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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