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

when we think about your guidance for the full year are you assuming any more kind of lack of fixed cost and absorption in the second i think five six million in h1 is there any in h2 expected and you mentioned you might kind of review capacity and stock and then the second question just on price and I guess just the way you think about that you obviously have the price increase in February and you're still sticking with your surcharges and you're confident they kind of cover the cost increases or you think about another proper price rise in kind of coming into the summer and into H2 thanks so I'll take pricing if you want to take the cost one we've

obviously implemented a price increase in february and then then given what was happening with the other you know inflation based geopolitical stuff we put one in in june we'd expect that to flow through fully for the rest of the year at this stage we're not planning on any other price increases i think we've been really trying to work very closely with our customers we we ate the cost for some time to see what was going to happen and then we communicated very effectively with them and we're not we're not looking to have any more now we'll have to wait and see what happens with the macros but at this stage we're not planning on any further price increases and on fixed costs our aim is to balance sales demand with production demand

um and with us with our outlet moderating on on our view of demand in the second half of the year and if i just taught bricks we'd expect probably to produce about between 45 and 55 million less bricks in the second half year versus the second half of last year so we will get like joe is alluding to really that fixed cost absorption headwind in the second half as well

we'll get the full view a full year of our cost improvement actions pulling through the second half as well Hi there, Max Hayes from Cavendish thanks for the presentation just on imports with the shareholding study what's happened again on pricing versus domestic and also has there been any shift in the regional mix or

has it been fairly consistent across the uk thank you yeah so imports have remained fairly fairly flat um and you know held held their share i think um some of the importers have been quite aggressive on price uh you you would look at some of the pricing points and say is that variable cost and freight and you're just trying to get cash that some of the markets over overseas are not great as well um we are going to need imports when the market comes back because the UK capacity is below the normalised market volumes and so I think a lot of customers want to keep a bit of a foothold and then some of the incumbents have taken more capacity off in the UK and are flexing their wider European capacity to bring things in so I think that's the main reason for it but they're flat I mean they haven't really changed in the last few years yeah i think regional splits wise that the southeast and london have been really challenged in the last few years you're starting to see some improvement um and there's a little bit more support for making the london market move but it hasn't really meaningfully changed at this stage it's still a fairly similar pattern

hi Ed Press from Berenberg on the balance sheet you talk about working towards two times EBITDA at the year end how dependent is that on market recovery and how dependent is that essentially on achieving H2 EBITDA greater than H1 and do you have levers at your disposal that you can use to reduce debt without the market recovery coming through

yeah so the our we naturally deliver in the second half just by how our weighting works on trading so it is linked to our view of of the market um it doesn't include any sort of strategic action to improve the balance sheet or net debt position it is based on trading but we are we we're confident in what joe said around the indicators we've got around it's not a massive improvement in brick volumes it's a small improvement on the first half we see improvement in concrete business and also we see further sales in futures and that gives us confidence around our net debt just naturally coming down and particularly the first half is particularly difficult so that gives us a view that we'll approach two times leverage

prayer will fear from jeffrey's thanks um i think i've just got three questions the first one um is on clay so you talked about market share gains i think that was a similar message from your other main listed peer so i just wanted to check where do you think those market share gains are coming from second question um just on lost or you talked about tens of millions of um of revenue potentially from inquiries if how should we sort of phase that in our forecasts over the next sort of couple of years and then the last question is just in terms of the exclusivity period ending with regards to that cal signed clay all those conversations what were the sort of main points of attrition that led to that exclusivity ending without a contract being signed good

yeah so um i mean we've given some numbers here to show the first five months uh market share on clay so um and i can't really comment on other other businesses and what they're saying um if they have taken share there's not that many players in the market so someone's lost some share um so it's pretty simple maths uh i think the main thing for us is really the range of products we have and the close customer you know connections and the strategic nature of the of the relationships we have deepening over time we we supply a broad diversity of the market and um that's house building rmi and other and i think um the team's done a really good job but engaging our customers and and working with them so um i'm pretty confident that uh our brand will continue to to maintain and and drive share um nostal is is really interesting I mean this is truly a differentiated factory it's still building up and the thing about specification products that link to the facade market is they've got a lead time typically a specification project a mid to high-rise building will be planned in it'll be between 12 and 18 months so we are getting you know and but they're already in the pipeline with architects and developers at stage one for example we see that and we've had inquiries come in the real thing for us now is to see how fast we can translate those inquiries into physical orders which I mentioned that we've got in the low millions now and then how quickly they get called off but there's no doubt that mid-high rise buildings with space constraints speed labor shortages really need these types of products so we're very excited about it and we think that the versatility of our Nostal site and the innovation we've had lots of customers visit already and they're getting very very excited about it so this is definitely going to change the market it's not going to cannibalize the brick market we still are going to have lots of traditional building going on in the UK but we think in the mid high-rise space and in certain sort of government infrastructure projects this is going to be a flyer and I think it'll ramp up over the next two years it's not going to ramp up fully this year or next year but we definitely see it ramping up you know within within three years it'll be to the business case that we've talked about before look when you have discussions and complex complicated negotiations it's always quite complicated I can't go into any detail because these conversations are confidential we are still talking to a key counterparty but I think given the fact that the exclusivity period is ending and in order to maintain the maximum value creation for the longer term I'm open to broadening those conversations to other partnership potentials

christian christian yield from deutsche bank managed to find the mic at the end um first question just to sort of maybe help make it really simple for us i think that the full year guidance in essence is like a mid single digit EBITDA increase versus the first half so how should we think about given the areas but in terms of the quantitative piece how should we think about bridging that gap and the second one I think Joe you mentioned for the full year you expect price and cost to broadly offset I assume that's in absolute EBITDA terms the way we should think about it rather than margin terms and also I assume was that the same for H1 as well where price and cost broadly offset at the EBITDA line or is there a bit of catch up to come in H2 thank you

I'll take the second one Simon can take the guidance one I mean we had some benefit in the first half from from pricing but we only put the I said we ate some cost with the other you know the inflationary based environment we waited to see is this a temporary thing is it going to change we didn't want to rush to sort of just put the other you know the inflationary based environment we waited to see is this a temporary thing is it going to change we didn't want to rush to sort of just put prices in straight away price increases straight away and i think that was fair for our customers so we ate some cost but now that we put it in in june you will see that cost largely offset inflation at its current levels for the second half

yeah in terms of guidance if you just talk h2 26 versus h126 we see just alluded to really we see some catch-up in pricing as the the sort of the difference in pricing and cost is a lot more normalized in the second half there so we see that we don't we see some growth in in clay volumes but only low single digit increase in clay volumes h1 to h2 so we get a little bit of benefit there we do see improvement in the two other areas of the business one being concrete and the other being futures concrete is yeah we have done several investment projects in the in the first half of the year which will be finalized and therefore will deliver product into the market which the market market needs and also we expect some gain from rail infrastructure a bit more in the second half of the year and also as the sort of inquiries around lost and when futures increase that will translate into sales and cover the fixed cost what we're suffering from a bit in the first half is the fixed costs are in but the sales are just gaining momentum and therefore we have a net cost in the first half year we see that moderating in the second half so you get a few of those improvements through and therefore that's why we believe EBITDA in the second half is slightly better than the first half and therefore getting to that sort of range number we've guided on Stephen?

That's Stephen Rawlinson for iValue two from me if I may firstly just thinking about calls on cash over the next 12 to 18 months would it be right to think that you're moving into a phase of maintenance only capex during 2027 and if so could you sort of give us a guide as to what the annualized level of maintenance capex might be um and secondly some of the routes to market that you use direct and indirect uh seem to be under some financial strain could you just give us a a few thoughts about your own management of credit risk and the next 12 to 18 months or so um as you move forward because quite clearly um you know the strains start to show through more typically 100 sometimes on recovery than necessarily on the downturn but just give us a clue on that please you want to say the first one on yeah yeah so on capex we would expect

are sustaining or maintenance capex to be around 20 million going forward i think we'd always expect a small level of improvement projects which which would be only around two to three million really as we look to improve the fleet so we you can probably classify that as growth but that would that would really be it we're not we're not anticipating to do any major growth investments in the in the near future so yeah 20 to 25 million would be our capex number going forward yeah

at this at this time we don't have any major concerns with credits i mean i know there was some chatter uh yesterday um but we we don't we obviously have good very good credit insurance uh which covers everything we monitor that and we're in discussions all the time um we're not seeing any big strain with our large larger customers with the smaller customers obviously they go through different routes to market as you alluded to i think some subcontractors have probably had some a tough time and and that's where there's a bit more exposure smaller subcontractor work and they tend to be supplied by some of the distribution networks but at this stage we're not seeing any major credit issues in the market harry

yeah thank you harry down from rostral and co um i think there's two questions on inventories firstly your own inventory i think was actually upside i think was the what you mentioned in the presentation are you sort of happy with where inventories are at the moment i know you talk about aligning production with inventories but could there be a period where we actually see production lower than sales to potentially bring that down and then secondly just on the channel inventories do you think there was an impact in the first half from and i think maybe starting in q4 last year from some of the house builders the merchants maybe starting to piece up a bit on the signs of weakness in which case that's maybe a one-off impact that we've seen potentially that might not occur in the second half

yeah quite insightful harry i think on our own inventories we we want to be really focused um we're probably higher than we would like to be um we're not in a desperate situation but we want to really manage that carefully obviously we've been we built more stock last year than we would have wanted and so our yards are fuller than it would normally be and that's why this year we've taken the action to destock we'll continue to manage that and if there is if there are changes we'll continue to flex it's better to do that than to build more stock levels um but as you look at wider inventory levels for manufactured products in the manufacturers yards you can see it hasn't changed that much we obviously took some action to reduce this year but there was quite a pronounced drop in February in the early part of the year with the weather and you just can't so you know while our plan was to actually have a working capital sort of inflow it didn't work out like that so we'll continue to be focused on that i think the channel you're right there's probably quite a bit of destocking as well um because there was quite a bit of stuff in the channels um and i think that started to wind through in the first quarter the second quarter of the year actually was quite quite optimistic i was quite optimistic because you start to see better dispatches um so i definitely think there was a bit of destocking going on in the first first quarter ben

thanks ben barrow rbc just on the pricing point again was there a difference between putting through prices for soft mud versus extruded has it been more difficult perhaps in the soft mud area um next on land sales that's obviously increased in your forecast can you give us a bit of an idea in terms of timing for that unwind thanks yeah i think

we differentiate prices are differentiated in the marketplace but general price increase was fairly similar across soft mud and wire cut products in the UK I think some competitors may have differentiated a bit more there's definitely a higher cost of production for soft mud products so you need to make sure you're capturing that back but I don't think there was any big changes in the general price increase around soft mud versus wire cut around land and timing we've obviously found there's a few more projects that we feel are coming coming closer but again these things to maximize the value you don't want to um move too quickly because you need to make sure you've got planning and the right conditions to maximize the value of the land so we've said in the next five years i think some will come before that i don't think we've got any big chunks this year but um but unless we unless unless something changes which it could um but i think you know in the next you know two to three years you'll see you'll see some interesting um interesting inflows.

Just two left if I may. There was a little note about carbon credit emission spend. It would be interesting to sort of give some idea of the scale of that and how you think that's likely to change going forward. And I suppose partly linked to that is obviously the sort of sustainability element of of the business and i suppose how much pull are you seeing from the customer base at the moment has that increased has that decreased you know obviously sort of the you know atlas plant is going to be a lot more energy efficient etc and things like the slips again have a very different sort of energy profile compared to sort of traditional bricks so it'll be interesting to see what the customers are sort of talking to you about on that front yeah so on

carbon emissions so we will look at the market around carbon and look at our exposure in terms of free allowances versus the carbon emissions we will buy carbon credits at a certain point to manage that dynamic and that's what we did in H1 we don't see any material difference in what our carbon exposure is at the moment but obviously it's driven also by the market and by how we are producing as well

and then on sustainability i said before um you know for us sustainability is is a lot we're a long-term business and we want to be a sustainable business um we believe that our products actually stand the test of time and are very sustainable anyway if you think about a brick and the carbon footprint of a brick over the life not just 60 years which is what's stipulated in in some of the uh the standards but actually over you know it's very very efficient products but We use energy, we use materials and we want to make sure we're the most sustainable in those areas. I think the future home standard, it's still a bit of discussion around that and there's a little bit of debate around the costs associated with it and house builders are having a real challenge. um but there's definitely been a lot of work done on on future home standards and what materials and and what sustainability requirements are needed for that i think when you talk to architects they're very conscious about sustainability specifying the most sustainable products for the long term but they're also talking about resilience with weather pattern changes and so on so it's more holistic than just carbon it's a much more holistic thing sustainability we think that you know things like atlas and the continuing drive to drive our carbon footprint down and other sustainability metrics is a real differentiator for us and we'll keep doing it how much price you're going to get for it in the short term given the challenges might be a bit debatable but we think in the long term having the credentials of a strong sustainable company is key charlie

um two but kind of related i think um just on the surcharges um presumably those could come off quite quite quickly i guess kind of customers would be keen to see that um so what are they watching in terms of the signal for those surcharges to come off um and secondly is related really just just wondering about uh your hedging policy for 2026 7 sorry um

and you know at what point uh you know which gas prices should we be looking at someone's the critical point this year in terms of decision on hedging for 27. thank you yeah so what the criteria we talked about with our customers when we um we introduced the surcharge they asked us to to look at a few things one being give us criteria what what your cost inputs are and largely that was linked to the um the gas price um and then they said when when things change give us give us a chance to make sure that this comes off so we were very clear about that obviously we ate the costs for a few months um and where you know we need to see where those costs go they started to come off when we thought there was going to be peace and then they went back up again uh so they're still in um the other thing to know about how quickly you can take them off which we will do when when things normalize is you can't keep changing pricing every every month the customers don't like that either because they've got to change all of their um you know back office and it's really complicated and they're often supplying other other end users so uh you've got to be mindful of those things but we're working really closely with our customers and we're you know talking to them regularly um in terms of the 2027 heads i think we're well hedged 60 simon um we will we normally like to be about 80% hedged by the time we get to budget at this time who knows what's going on so we're not we're not piling in or we're just staying cautious but we've actually got gas that we buy in energy for 28 and 29 you know like our like our some of our competitors so we've we hedge forward and we take layers of cover as we go but the near-term market there's too much risk forecast in it so we're not we probably wouldn't go in at the moment think that might be about it any other questions good so thank you very much for your attention today look we it is a difficult backdrop there's lots of potential uh exciting things that may come uh with with uh some of the announcements from the government maybe a bit of peace in the middle east hopefully um and we can get this market moving again we are really well positioned uh for when this market comes back i think ipsoc is is a really strong recovery play for the uk market and we have to start building more um but we will continue to navigate the short-term challenge as well so thanks very much and we can have a bit of a chat now if you'd like to stay around