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Forterra shares jump as buybacks begin

Company kicks off £40m programme to repurchase shares
Forterra shares jump as buybacks begin
  • Full-year revenue of £370m expected for 2021
  • Price rises implemented to offset higher energy costs

Building materials company Forterra’s shares jumped more than 10 per cent as it began a £40m share buyback programme after finishing last year with more cash than expected.

The company sold 33 per cent more bricks in 2020 than 2021 and said revenue of about £370m will be 27 per cent ahead of last year, but 3 per cent lower than in 2019. The two-year decline was due to the closure of a precast concrete factory in Swadlincote, Derbyshire, which was sold off in August.

The company is instead ploughing ahead with a £95m expansion of its brick factory at Desford in Leicestershire and a £27m modernisation of a facility at Wilnecote in Staffordshire, both of which it says are running on time and to budget. Desford is set to open by the end of this year and will increase the company’s brick production capacity by 16 per cent.

A shortage of bricks in the UK has allowed Forterra to implement “significant double-digit price rises” both at the end of last year and the beginning of this to offset soaring energy prices, which means profit will remain in line with expectations.

Deutsche Bank analysts expect the company’s earnings per share for 2021 to more than double to 17p and climb again to 22p this year, although buybacks could lift this. Investments will be a drag on cash in the short term, though, and its forward PE ratio of about 12 times earnings is in line with competitors like Ibstock. Although demand for building products is likely to remain robust, growth is slowing, the Construction Products Association said earlier this week. Hold.

Last IC View: Hold, 275p, 9 March 2021