With around two-thirds of brick sales going into the new-build housing market, it came as no surprise to see Forterra (FORT) making great strides in the first half to June this year. Last year’s destocking in the builders merchants' supply chain has finished, and brick volumes rose by over 10 per cent. Output capacity will also be enhanced by completion of the upgrade at the Claughton facility, which will now be able to produce an additional 5m bricks a year.
Sales in bespoke products rose by 5 per cent, thanks mainly to demand for precast flooring, but higher raw material costs were not fully recouped by increased selling prices, and adjusted cash profit slipped from £3.8m to £3m. Forterra has also acquired Bison Manufacturing from Laing O’Rourke for £20m. This is an especially attractive acquisition because Forterra's precast concrete business is currently capacity constrained, whereas there is unused capacity at Bison for hollowcore precast concrete flooring. Following efficiency improvements, this is expected to generate a return on its investment in excess of its cost of capital by 2019.
Finances are in good shape, with operating cash flow up £7m at £31.9m. This helped to reduce net debt by a quarter to £69.4m, although this is expected to edge up in the second half reflecting increased capital expenditure.
Analysts at Numis are forecasting pre-tax profit for the year to December 2017 of £60m and EPS of 23.7p (from £54.3m and 21.4p in 2016).
| FORTERRA (FORT) | ||||
| ORD PRICE: | 283.5p | MARKET VALUE: | £568m | |
| TOUCH: | 281.75-283.75p | 12-MONTH HIGH: | 296p | LOW: 135p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 47p* | NET DEBT: | 73% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 146 | 13.0 | 4.4 | 2 |
| 2017 | 163 | 31.4 | 12.6 | 3.1 |
| % change | +11 | +142 | +186 | +55 |
| Ex-div: | 21 Sep | |||
| Payment: | 12 Oct | |||
| *Includes intangible assets of £13.9m, or 7p a share | ||||
