Ibstock has announced a 21% drop in revenue for 2023 but hails a resilient performance against a challenging market backdrop.

According to the company's results for the year ended 31 December 2023, an adjusted EBITDA of £107 million (2022: £140 million – down 23%) is in line with expectations set at the start of the year underlining the quality and resilience of the business and the steps taken to reduce costs.

Revenue was down 21% to £406 million (2022: £513 million) as sales volumes reduced in line with UK domestic brick deliveries. Despite this challenging backdrop, selling prices remained stable through the year.

Adjusted EBITDA margins remained relatively constent at 26.5% (2022: 27.2%), which the business sees as reflecting a continued focus on customer service and execution, combined with the disciplined and decisive management of capacity and costs.

However, statutory profit before tax were down an eye-watering 71% (to £30 million from £105 million in 2022). This included an exceptional charge of £31 million, of which £10 million was a cash cost following the restructuring programme undertaken during the year (2022: exceptional profit of £6 million)

IN reaction to this, a comprehensive operational review was undertaken during the year to reduce fixed cost and align capacity to near-term demand expectations.

The resulting restructuring programme included a number of actions to temporarily reduce capacity across the business, as well as the permanent closure of two clay brick factories. This also included redundancies and fixed costs savings, with an annualised value of £20 million to be fully achieved in 2024. 

In parallel, the group launched a capability investment programme, which is now nearing completion. It successfully commissioned the new Atlas brick factory in the West Midlands, with production expected to ramp up over the course of the year.

Similarly, the first brick slips to be produced on the company's automated cutting line at Nostell in West Yorkshire will be delivered during the first half of 2024.

The Group is developing opportunities to accelerate its recovery as conditions normalise over the medium term by extracting higher value:

  • From its existing portfolio – Building on the launch of the “One Ibstock” brand by integrating the Group-wide sales and commercial functions into a single team to drive improved customer-centricity and cross-selling
  • From its factory network – The combined effect of investment projects and targeted closures will result in a permanent net capacity increase of up to 5% within the clay brick manufacturing network compared to 2022, with significant improvements in efficiency, productivity and environmental performance
  • From new product development – The Nostell investment will provide a step change in capacity for brick slips, a key pillar in a growing portfolio of building envelope technologies within Ibstock Futures, targeting high-growth market niches
  • From its clay reserves – Further progress made towards the production of calcined clay for use as a low-carbon cementitious replacement, with further discussions with potential commercial partners expected in 2024

Activity in the early weeks of 2024 has been in line with the subdued levels seen in the latter part of the 2023 year. While remaining cautious, Ibstock currently anticipate a degree of improvement as the year progresses.

It is expecting a year-on-year benefit of £15 million in 2024, broadly equivalent to the benefit in 2023 from fixed cost absorption into finished goods inventories.

With the factory network running at lower levels of utilisation, the Group will retain a level of elevated fixed cost in 2024, which preserves its ability to build back quickly as markets recover.

Joe Hudson, Chief Executive Officer, commented: “We have delivered a resilient performance for the year in what have been very difficult market conditions, and I am proud of the way that colleagues across the Group have responded in such challenging circumstances.

“Our results reflect both continued strong execution and the difficult but decisive actions taken to reduce headcount and realign capacity with near term market conditions. The organisational changes implemented during the second half of the 2023 year have created a leaner, more customer-focused business, which will deliver an enduring benefit for years to come.

“In doing so, we have also created a platform to accelerate innovation, with a particular focus on the sustainability of our products and processes. In combination with the strength of our brand and unrivalled product portfolio in the UK construction marketplace, we believe this will unlock significant value over the years ahead.

“As we focus on doing the right things to respond to market conditions in the near term, we are moving towards completion of the key investment projects that will underpin our growth as the market recovers.

“Our investment in new low cost, efficient and more sustainable brick capacity at our Atlas facility, and a significant capacity expansion in the fast-growing brick slips market, are on track and will support our medium-term growth objectives.

“Activity in the early weeks of 2024 has continued to reflect the more subdued demand environment experienced throughout the latter part of 2023. As we look further ahead, it is clear that market fundamentals remain supportive, with significant unmet demand for new build housing in the UK.

“The Group’s conviction in its medium-term prospects is underpinned by an expectation of a return to normalised conditions within its core markets combined with the incremental returns generated from our significant capital investment programme. Although the timing of this recovery is uncertain, Ibstock is well positioned to benefit and to deliver on our growth targets over the medium term.”