Brickability Group has released an update on recent trading and in respect of the financial year ending 31 March 2024
The update states that against what it sees as a challenging trading backdrop, the Group is continuing to demonstrate its resilience through growing diversification, with good performances in both the Distribution and Contracting Divisions partly offsetting tougher comparators in Bricks and associated building products.
Brickability notes that market volumes for bricks in the UK have been significantly lower in the last twelve months, with UK despatches for the calendar year 2023 approximately 30% lower than 2022. Over the same period, brick imports into the UK are estimated to have fallen by 42%.
Group sales volumes for the financial year ending on 31 March 2024 (FY24) in the Bricks and Importing Divisions reflect these market trends, with FY24 revenues year-to-date at lower levels than in the previous year. Pricing is becoming increasingly competitive given the softer demand.
However, the Distribution Division has traded well despite the slowing of private housebuilding and residential RMI markets, and gross margins have remained strong.
Upowa, the group's sustainable technology subsidiary, is seen to be well placed to benefit from further regulatory changes in new build housing and the increasing demand for more sustainable and zero-carbon technology solutions.
The Contracting Division also continues to perform well, according to the update. The integration of the recent acquisitions of Topek Holdings and TSL Assets is underway, and both companies are experiencing increased levels of enquiries.
The business expects the lower levels of demand in bricks and associated building products experienced year-to-date to persist through to the end of the current financial year, and accordingly, the Group’s FY24 adjusted EBITDA is expected to be towards the lower end of current market expectations (£46.2 million within a range of £44.8 million to £47.2 million).
The upate finds what while it is encouraging that the rate of inflation is trending down favourably and the widely expected fall in interest rates will benefit the wider market, trading conditions are expected to remain challenging for longer than initially anticipated.
As a result, the board now considers it appropriate to assume a more conservative profile for the group’s recovery over the next twelve months. The underlying long-term demand for UK housing remains robust, and the group is well placed to benefit significantly as the market and volumes recover.
Alan Simpson, Chief Executive Officer, said: “I am extremely pleased with the performance of the Group and of its employees, given the continuing challenging market conditions outside of our control. The short-term factors impacting our businesses are well publicised, however, we are very excited by some of the opportunities we are seeing in the market.
“We continue to make further progress on our strategy, which includes diversifying the Group through differentiated product offerings and acquiring higher margin revenue streams, the benefits of which we are already seeing. The two recent acquisitions demonstrate our ability to identify and execute quality acquisitions, whilst maintaining a robust balance sheet.
“We have maintained a disciplined approach to cost and cash management during this period, and I am confident the Group is extremely well positioned across each of its divisions to benefit when activity in its end markets recover.”
