- Chief executive Stephen Harrison stepping down next year
- Wilnecote upgrade delayed due to chip shortage
Forterra (FORT) said demand for bricks remains robust and that it expects its half-year result to be ahead of both last year and the same period in 2019, despite headwinds.
Group revenue for the first four months of the year was up 25 per cent year-on-year, with brick volumes 6 per cent higher and selling prices passed on through two double-digit price increases.
The company has also secured about 85 per cent of the energy it needs for the current year and about a third of its supplies are locked in for next year. Shares rose 4 per cent in early trading.
Forterra also said longstanding chief executive Stephen Harrison, who oversaw the ex-Hanson Group unit's spin-out through private equity hands and back onto public markets, is stepping down after a decade in his current role. He will continue in his post until early 2023 to oversee the opening of its new £95mn Dessford brick factory in Leicestershire and “support an orderly transition”, the company said.
Meanwhile, the £27mn refurbishment of its Wilnecote brick factory in Staffordshire is being postponed for three months in response to the global semiconductor shortage, as chips are being used in robotic equipment. Although the duration of the project will remain unchanged, the existing brickworks will stay open for an extra three months which will have “a positive impact of £1.5mn” on its 2022 result.
Broker Jefferies said that given the search for Harrison's successor has only just started, it does not expect any near term impact on Forterra’s share price or group strategy.
Peel Hunt said capacity constraints mean the volume growth experienced so far this year “will not be sustainable" for the remainder, but the strong trading so far led it to increase its full-year cash profit forecast by 5 per cent to £89mn.
After falling by 12 per cent this year (against a sector decline of 20 per cent), Forterra's shares trade at 10x the broker's forecast earnings per share of 23.9p this year and 9x its estimate of 27.5p next year. We maintain our buy.
