Ibstock plc

right good morning and welcome to ifsocks uh 2026 half year results presentation i'm joined today by simon bedford our interim cfo and i'd like to thank simon for his support and leadership during his time as interim cfo as previously announced will wilkins has also joined goodstock as cfo earlier this week and is with us here today in the front row you'll have the opportunity to meet will after the presentation today Before I begin, it's also worth recognizing that we've been proudly marking 200 years of the original site of Ipstock, and a few industrial businesses can trace their roots back over two centuries, and we're really proud of that. With that, let's turn to the agenda. I'll share an overview of the first half of the year and how we're navigating what remains a very challenging market. Simon will then take us through the financials in more detail, including the divisional results, cash flow, and balance sheet. i'll then come back to update you on market dynamics and on the progress across our five strategic levers and i'll then summarize our outlook for the remainder of the year before we move on to q a turning first to the overview we entered into the year with the expectation that there would be some growth in the market however poor weather and macro economic events led to more volatile conditions and subdued market demand across our key end markets against this backdrop the business has delivered a solid performance in line with our expectations some key messages to point out the clay business delivered a resilient performance in the period uk domestic brick deliveries for the first five months were down around eight percent year on year and our comparable sales volumes were down around seven percent meaning we gained domestic clay market share in the period while our concrete business has also been impacted by the challenging backdrop most of our categories have outperformed the market we've acted decisively to manage capacity production volumes and inventory and we continue to align output to demand manage inventory carefully and maintain discipline on overhead and costs in parallel our teams have continued to make strong progress across the five strategic levers that underpin our medium-term value creation plan and i'll go into more detail on that later despite not anticipating any meaningful market improvement we expect to achieve a stronger adjusted EBITDA in H2 than in H1 supported by customer order intake and anticipated stronger performance from our concrete and futures businesses and normal seasonal weighting towards the second half with near-term conditions expected to remain challenging the full year outturn is anticipated to be around the lower end of current market expectations and finally While the timing of recovery remains uncertain, IFSOC is well placed to deliver growth and value creation as market conditions improve. We have a market leading position, a more efficient asset base, major capital projects largely complete, further and further optionality to generate cash from our land and clay reserves. In that overview, let me hand you over to Simon to take you through the financials.

thanks joe and good morning everybody i will now take you through the financial performance for the first half as joe said the market backdrop remained challenging but the business has performed in line with our expectations with focused execution across pricing cost capacity inventory and cash management turning first to the financial summary group revenue for the first half was 164.2 million pounds compared with 193.4 million pounds in the prior year On a reported basis, this represents a reduction of 15%, affecting both the market backdrop and the sale of our non-core 40-degree roofing sites at the end of 2025. On a like-for-like basis, revenue was down around 10%. Adjusted EBITDA was £25.7 million compared with £35.5 million last year, with a reduction driven principally by lower volumes, the fixed cost absorption impact of deliberate production and inventory management actions and continuing cost inflation. This was partially offset by the benefit of around half the 5 million annualised cost savings from the rightsizing action taken in 2025, as well as ongoing efficiency actions. Adjusted EPS was 0.7 pence compared with 3 pence in the prior period. Net debt to EBITDA led, which was 2.5 times on a banking covenant basis at the half year, compared with 1.9 times in June 2025. This reflects lower earnings and a small increase in net debt. net debt and leverage are expected to reduce in the second half as cash generation strengthens while roki was disappointing in the period we expect to return to our target rate of 20 as the market recovers the board has proposed an interim dividend of 0.5 pence per share moving now to cover me cover the revenue bridge group revenue reduced by 29.2 million pounds year on year from 193.4 million pounds to 164.2 million pounds The first quarter was particularly challenging given subdued demand and weather impacts, but we saw improving volume trends during the second quarter. Clay revenues were 10% low on a reported basis with core clay revenue down 8%. That reflected lower volumes in the first half, partially offset by positive pricing. We implemented annual price increases in February and introduced a temporary surcharge in June to help mitigate additional energy and fuel related inflation. Concrete revenues were down 26% on a reported basis and around 11% on a like-for-like basis. The reported decline reflects the 40-degree roofing sale, while the like-for-like movement reflects continued weakness in residential and RMI markets, partially offset by improving demand for rail and infrastructure projects, a bet from a relatively low base. Overall, the bridge reflects the reality of a difficult market, but also the actions we are taking to protect value through pricing discipline. Turning now to Clay. Clay delivered a resilient performance against a challenging backdrop with market share gains in the period. Total revenue was £119.9 million, down £13.6 million year-on-year. Core Clay revenue, excluding futures, was £118.1 million, down 8%. Volumes were lower in the first half. However, as Joe mentioned earlier, that was better than the wider domestic market in the period up to the end of May. Headline pricing remained marginally positive. The February price increase in the temporary fuel and energy surcharge introduced in June helped to offset part of the cost inflation in the period. In terms of mix, we continue to see stronger performance in new build housing and wire cut bricks, while demand for soft mud bricks remain more subdued, particularly in RMI in the South East and London markets. Adjusted EBITDA for clay was £23.4 million compared with £32.8 million last year, with margin reducing to 19.5%. the reduction reflected lower volumes and the temporary fixed cost absorption headwind from our deliberate management of capacity production and inventory levels those actions reduced EBITDA by approximately five to six million pounds in the period but they are the right actions to align output with demand and manage cash within clay the stock futures cost base increased as nostal ramps up with net costs of 2.5 million pounds compared with 1.5 million pounds in the prior year As Joe will cover later, customer engagement around Lustre was encouraging and we remained confident in the long-term opportunity. Turning to concrete. Concrete revenue is £44.3 million, down 26% on a reported basis and 11% on a like-for-like basis. The reported movement reflects the impact of the 40-degree roofing sale in Q4 2025. The market backdrop remained challenging across private residential and RMI, with flooring products particularly affected by the subdued activity. However, infrastructure demand provided some support with rail-related sales improving during the period and most other concrete categories declining less than the market. Adjusted EBITDA was £3.7 million compared with £6 million last year, reflecting lower volumes and continued weakness across key end markets. EBITDA margin was 8.3% down on the prior year. During the period, we saw continued strategic investment in selected manufacturing sites. that temporarily reduced production capacity as lines were taken offline for upgrades but it positions the division to deliver operational and efficiency benefits in the second half and beyond so while the near-term market remains difficult we continue to see medium-term opportunities in concrete particularly as rail and infrastructure activity improves and as our investment in selected sites begins to deliver benefits Moving now to cash flow, adjusted free cash flow was an outflow of £22.3 million compared with an outflow of £9.6 million last year. The principal driver was the reduction in adjusted EBITDA together with seasonal working capital movements. Working capital was an outflow of £17.2 million compared with £12.4 million in the prior period. The outflow reflects the normal seasonal pattern inventory levels did increase modestly against the comparative period as trading volumes were softer than expected capex reduced to 15.2 million compared with 20.9 million pounds last year of this around 4 million pounds relates to organic growth investment and 11 million relates to sustaining capex and improvement projects the important point that our major organic growth programs are largely complete as a result we would expect an acceleration in free cash flow generation as capex normalises and as trading conditions improve turning to the balance sheet net debt at the 30th of June was £151.3 million this was in line with expectations and reflects the normal seasonal increase in working capital lower earnings in the first half and the broader trading backdrop leverage was 2.5 times at the half year compared with 1.9 times at June 2025 we expect net net debt and leverage to reduce in the second half supported by stronger cash generation with leverage moving towards two times at the end of 2026 we continue to manage cash carefully with a clear focus on liquidity cash generation and maintaining financial flexibility through the cycle for those looking for the technical guidance for 2026 this is included in the appendix section with that i will hand back to joe to cover our market drivers and strategic progress

thanks simon so at the full year presentation in march we set out five strategic levers that will help us to drive shareholder value over the medium term these are market leadership growth in new market sectors product innovation efficiencies and strategic options we've made some good progress across each of the five strategic levers in the first half of 2026 and this is strengthening the business today as well as building additional sources of value and diversification for the medium term before sharing progress across the levers let's start with an update on the market if we turn to the cool markets you can see from the chart that there's been a big swing in industry forecasts related to housing starts and completions for us housing starts are a key indicator and the cpa have moved from forecasting an eight percent growth in 2026 in their winter forecast to a nine percent decline now in their summer forecast there's a similar picture for heavyside rmi but a more encouraging picture for infrastructure output which is showing low single figure digit growth the macro environment is not helping with the evolving situation in the middle east and the uk changing political landscape affecting consumer confidence house builders are experiencing bill cost inflation and margin challenges and it's difficult to see this changing meaningfully in the short term without some sort of targeted intervention from the government such as a support for first-time buyers the longer term fundamentals are still positive the uk continues to face a significant housing shortage we have also an aging housing stock that requires ongoing investment and renewal planning reforms and the recent announcements about building council housing are very interesting but this will all take time and we need a short-term action to improve the pace of recovery so while we remain cautious about the near term we continue to believe the medium-term opportunity is significant turning to the brick market clearly there's a strong correlation with the housing and rmi markets and brick dispatches domestic brick deliveries for the first five months of the year were down around eight percent year on year as i've mentioned dipstock clay volumes were down around seven percent for the same period imported products were stable at around 19 of the overall market at the same time there's been discipline on production in an inventory uk manufacturing inventory levels were broadly in line with december 2025 reflecting the actions we and others have taken to align output with demand rather than allowing stock to build looking at our own clay capacity as stated we've reduced our production in h1 and our plan for the year will continue to align production with market demand Managing production and stock to recent volatile market conditions is a challenge, and we need to balance the short term with the need to supply a market that must see some recovery in the mid-term. At this stage, we expect to see some improvement in volumes from H1 to H2. Should that not happen, we will flex our production down further. And as Simon explained, this would create a margin headwind in the short term, but would be the right approach for cash, discipline and longer term value. okay let's turn to our first strategic leader market leadership with more than 200 years of trusted knowledge and expertise the breadth of our offering the strength of our customer relationships our national footprint and technical capabilities gives us a very very strong brand position as customer requirements continue to shift our expertise in product performance durability technical specification and sustainability are important differentiators while many of our customers are looking increasingly our local increasingly larger players are looking to have national offers across a range of clay concrete and facade products and solutions under one unified hip stock proposition and we're definitely benefiting from that during the first half our focused commercial strategy has gained market share along with further deepening customer relationships improved service and using insights more effectively to inform future growth priorities turning to growth in other sectors i mentioned in our last market update that we see significant medium-term opportunities in the areas of social and affordable housing mid to high-rise buildings along with a huge pipeline of public sector buildings and infrastructure projects we know the government's 39 billion pounds affordable homes program provides a strong foundation with additional discussions on council house building expected to drive further activity in the years ahead While we've yet to see funding fully translate into a meaningful increase in delivery, our focus on end user relationships and housing association engagement is helping to build share and strengthen our pipeline. Several strategic relationships are tracking double digit year on year growth, demonstrating the value of this more targeted approach. Although building safety issues have constrained recent activity levels, mid to high rise is an important long term opportunity, especially for facade systems. alongside this the remediation market remains a sizable opportunity with thousands of buildings still needing recladding the third area is public sector investment the government has committed to 718 billion to infrastructure and public sector buildings over the next decade across areas including education health care and justice this chart shows the anticipated spending splits and we are increasingly targeting these markets You can see on this next slide an example of our proposition within the education sector. The range of Ipstock products that align to the Department for Education's construction framework is very broad and is enabling earlier engagement with customers. As a result, we've seen strong engagement from notable tier one contractors with millions of pounds of pipeline opportunities. As with the education example, we also see similar opportunities in health, social care and the recently announced defence infrastructure spend. The third strategic lever is product innovation. Innovation remains central to our growth strategy. It helps differentiate Ipstock, supports the evolving needs of our customers and opens new routes to market. Revenue from new and more sustainable products now represents around 25% of our group revenue. Looking at the first half of 2026, within clay Atlas is now making 12 products, including the first from our carbon neutral range. That's an important milestone, combining efficient production with enhanced product capability. Atlas will continue to benefit from investment in hydrogen, subject to the forthcoming R2 government funding round. In concrete, we brought to market the Anderton Gen3 cable trough in June with Network Rail approval. this product is designed to significantly improve installation efficiency and support the demands of critical rail infrastructure projects and across our facades range the new nostal facility is creating a strong platform for growth with good customer engagement and specification activities taking a closer look at nostal this site will deliver some truly differentiated ceramic products and manufacturing capabilities unlike anything else in the uk factory acceptance testing is now completing and we've seen a strong customer response in both the new ibricks and fastwall ranges orders for the core ranges are already in the low millions with inquiries in the specification pipeline in the tens of millions fastwall has also already received industry recognition as house building's best new product of the year We look forward to hosting investors at Nostal showcasing its capability first hand and this is currently planned for early October. So get your tickets. Our fourth lever is in driving efficiencies and this is focused on three main areas. Firstly our manufacturing estate. Over the last eight years we've invested over three million pounds to modernize our network. that investment has created a safer more automated efficient and more sustainable asset base which will return significantly as our utilization levels improve as simon mentioned we've completed improvement projects on our concrete flooring walling masonry and lift shaft factories we expect to see improving performance as some of these investments ramp up from h2 and into the future we've also used the current market conditions to extend shutdowns in targeted play factories and invest in high return upgrade projects an example of this is one of our largest wire cut factories in nottingham where we're now seeing higher output and energy savings of between 15 and 20 we've also launched an operational excellence program which will deliver long-term efficiencies and cost reductions across all locations this has now started with key pilot sites and will extend more widely into 2027 the third focus extends beyond manufacturing we continue to drive efficiency through process simplification systems improvement and digital enablement during the first half this included the implementation of a new customer relationship management platform alongside a number of initiatives using ai tools designed to improve the effectiveness across the group And the last area I'll touch on is further strategic optionality centered on our land and clay reserves. Just to provide a sense of scale, today we manage over 2,700 acres of land across the UK, spanning our factory estate, clay quarries, where we have unrivaled clay reserves, as well as a much wider natural estate. We see increasing value being realized through several complementary routes. Firstly, the commercialization of calcined clay. secondly a program of land development and sales and thirdly land-based income streams looking at these three routes starting with calcine clay calcine clay is growing to become a key area for cementitious materials and ipsoc has invested to develop a major project of scale in the uk this is an important foundation in decarbonizing the construction industry using a lower carbon lower cost cementitious replacement material during the first half of the year we've concluded further geotechnical work and investment to maximize the potential of the asset we also continue to progress commercialization during the period with an exquisite period with one counterparty now ending discussions may broaden to include alternative partnership opportunities as we seek to maximize long-term value from this strategic asset we will continue to update the market on this initiative given the current live conversations taking place moving to look at land sales again further work has strengthened our view of the opportunity and we now expect our well-established land development and sales program to deliver from the previously expected 25 to 30 million pounds to around 50 million pounds over the next five years the final area is in our land-based income streams today we already generate around two million pounds of annual income through inert landfill and energy however we see growing opportunities to create additional value with increased restoration and biodiversity net gain, and believe this could more than double. A good example demonstrating this opportunity is our former Dalton Quarry in Lancashire, which is being transformed into a biodiversity habitat bank, generating around £1 million per year. We see the potential for possibly two or three more of these, as well as the need for increased inert landfill projects. taken together these opportunities demonstrate the breadth and quality of the asset base and the optionality it provides for long-term value creation so bringing that all together we continue to take all the necessary actions to manage the near term whilst keeping the long-term potential of the business intact despite not anticipating any meaningful market improvement we expect to achieve a stronger adjusted EBITDA in h2 than h1 and that's supported by our customer order intake and anticipated stronger performance from our concrete and futures businesses and the normal seasonal weighting towards the second half with near term conditions expected to remain challenging the full year our turn is anticipated to be around the lower end of current market expectations net debt and leverage are expected to reduce towards two times by the end of 2026 supported by stronger cash flow generation we expect price and actions to broadly offset cost inflation and will continue to actively manage production and inventory levels our major organic growth projects are now largely complete and that gives us a more efficient manufacturing network a strengthened platform for growth and greater optionality as free cash flow improves over the medium term we remain confident in the fundamentals in the business the long-term drivers of demand remain sound our market position is strong and our five strategic levers provide clear routes to value creation in addition to market recovery and with that sam and i'd be very happy to take your questions as normal for the record i'd be grateful if you could state your name and institution before asking your question and if you're in the room you can press the button on the microphone on your your seat so people can hear